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The EBA and the Banking Union | The Banking Union and the Creation of Duties


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Conference: The Banking Union and the Creation of Duties - Department of Law, Robert Schuman Centre for Advanced Studies, European University Institute

By: Stefano Cappiello, Head of Resolution Unit, EBA

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The EBA and the Banking Union | The Banking Union and the Creation of Duties

  1. 1. The EBA and the Banking Union Stefano Cappiello Head of Resolution Unit Firenze, 19 March 2015
  2. 2. 22 Outline 1. The EBA and the Banking Union (BU) 2. The tools of the EBA 3. The EBA and the SSM 4. The EBA and the SRM 5. The way forward
  3. 3. 333 1. The crisis and the establishment of the EBA 3 • The “first wave” (2008/2009) of the crisis showed the weakness of the Single Market for banking services built on the principle of “minimum harmonization” and “mutual recognition” lack of truly common rules across the Union led to: regulatory arbitrage with spill over effects (eg national definitions of loss absorbing capital instruments); different reporting systems (eg NPL) which weakened market discipline and cross-border supervision; obstacles and unnecessary duplications and burdens for the operations of cross-border groups • From minimum harmonization to maximum harmonization (the Single Rulebook) • The EBA to build the Single Rulebook (SR) and to ensure its consistent application across the Union
  4. 4. 44 1. The BU and the impact on EBA 4 • The “second wave” of the crisis (2011): the lack of a European safety net and coordination for cross-border resolution triggered the vicious circle between sovereigns and banks, and ring fencing between Member States • Harmonization is necessary but not sufficient: it has to be accompanied by integration of supervision (SSM) and resolution (SRM) • Does the role of the EBA change ? • The SR is fundamental for the smooth functioning of the SSM and the SRM, otherwise national rules would hamper the conduction of common supervision and common resolution • The SR is fundamental to avoid a fragmentation of the Single Market between BU- States and non-BU-States
  5. 5. 55 The EBA and the roles with respect to BU and nonBU EBA Single rulebook - EU28 SSM SRM CRR/CRD IV (Basel III) BRRD/Deposit Guarantee Scheme Non BU authorities EBA coordination- convergence
  6. 6. 66 2. The regulatory tools of the EBA  The EBA draft technical standards: • TS specifying directives: what implications ? • due process: public consultation, endorsement of the Commission, and claw-back of the Parliament • scope of the mandates: the (blurred) line between “policy/strategic choices” and “technical choices”,  The EBA guidelines and recommendations: “comply or explain” and implications for the binding effect  The other “soft law” tools: the Q&A tool; the advices and opinions to the European institutions  The breach of law procedure
  7. 7. 77 EBA 7 Product Type 2011 2012 2013 2014 2015* Guidelines 2 6 2 17 16 Implementing Technical Standards 21 10 8 Regulatory Technical Standards 1 39 22 26 Opinion 1 6 5 14 26 Report 6 12 26 23 25 *expected The Interactive Single Rulebook on the EBA website to facilitate integrated access to L1 and L2 rules, GL, QandAs
  8. 8. 88 2. The convergence tools of the EBA  Promoting consistent and convergent supervisory practices across the Union (same rules need to be applied in the same way) The tools: recommendations; Europe-wide stress-test; peer reviews; thematic studies (e.g. on RWAs); Single Supervisory Handbook  Promoting cooperation and coordinated decisions between “home” and “host” authorities for cross-border groups The tools: participation to colleges to facilitate “joint decisions” between home and host authorities, and possibility to carry out binding/non binding mediation when disagreement occurs. The differences between mediation and breach of law procedure
  9. 9. 99 3. The work of EBA on prudential regulation (and the SSM)  In the first years the EBA focused on the harmonization of the “own funds” definitions, on the creation of a single reporting system for all banks (COREP and FINREP) and the harmonization of the key definitions for reporting (NPL, asset encumbrance, forebearance)  From the numerator to the denominator: EBA action has now expanded on the banks’ models to measure market and credit risks (reports, TS, GL)  National discretions/options allowed by the CRD/CRR are a source of concern. Transitional versus permanent options. The importance of the issue for the SSM. The monitoring carried out by the EBA
  10. 10. 1010 3. The work of EBA to build the new resolution regime (and the SRM)  40+ TS and GL stemming from the BRRD and DGSD, and a number of advices for the Commission  The room for national discretions allowed by the BRRD as a concern for cross-border resolution, even within the SRM  Beyond regulation: EBA to participate to resolution colleges, mediate for joint decisions on cross-border resolution plans, carry out benchmarking and simulation exercises
  11. 11. 1111 4. The way forward  BU as a driver to strengthen the SR, both in supervision and resolution  Expanding the SR to other areas such as corporate law and insolvency law ?  EBA’s tools: has the time come to fine tune some of them (e.g. the scope of the TS, or the mediation ?)  The BU calls for a revision of the EBA’s governance bodies ?
  12. 12. 1212 THANK YOU ! Stefano Cappiello EBA Resolution Unit European Banking Authority Tel +44 (0)20 7382 1770 Fax +44 (0)20 7382 1771