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April 09, 2018

ECB published its annual report for 2017. The report covers the economic and financial developments, in addition to supervisory activities of ECB in 2017. It also presents activities of the Eurosystem in its various areas of competence. The ECB Vice President Vítor Constâncio presented this annual report to the ECON Committee in Brussels. In his remarks, he discussed the impact of the ECB decisions on the euro area economy in 2017 and stressed the crucial role of the financial sector for effective transmission of the monetary policy and the conditions under which it can support growth. ECB also published the feedback on the input provided by the European Parliament, as part of its resolution on the ECB Annual Report for 2016.

The annual report highlights the substantial analytical and policy contributions of ECB to a number of regulatory initiatives at the international and European levels in 2017. Based on the report, the key contributions of ECB included the following:

  • Finalization of the Basel III. ECB was actively engaged in the policy discussions on the finalization of Basel III and fully participated in the impact analyses. Looking ahead, it will be essential to implement the finalized Basel III package across all jurisdictions and monitor progress carefully. To this end, ECB deems it important to maintain the high level of international cooperation that has characterized the post-crisis work, as globally agreed standards are key to ensuring financial stability.
  • Revision of the micro- and macro-prudential regulation for banks in EU. On November 23, 2016, EC proposed a comprehensive package of banking regulation reforms. These global standards include bank capital adequacy and liquidity requirements developed by BCBS, such as the net stable funding ratio, the leverage ratio, and the fundamental review of the trading book. Furthermore, the proposal introduces additional changes to the supervisory framework on a number of issues, including the powers available to supervisors (the Pillar 2 framework), provisions on capital waivers and intermediate parent undertakings (IPUs), national options and discretions, proportionality, and the treatment of third-country groups.
  • Revision of the crisis management and resolution framework. EC proposal on banking regulation reforms included several revisions to the EU recovery and resolution framework; it addressed key issues by amending the minimum requirement for own funds and eligible liabilities (MREL) and implementing the total loss-absorbing capacity (TLAC) standard for global systemically important banks; introducing two new harmonized moratorium powers for the competent authority and the resolution authority; and increasing the harmonization of the creditor hierarchy by introducing a new “non-preferred” senior debt class. ECB Opinions on various aspects of EC proposals were published in March and November 2017.
  • Work on the completion of the banking union. ECB contributed to the continued discussions on completing the banking union. ECB is participating in the discussions on the proposed risk-reduction measures and issued Opinions on the subject. It is also important for ECB that a common backstop to the Single Resolution Fund be established as soon as possible; to this end, ECB is providing technical support to the quantitative work being undertaken to estimate the banking sector’s capacity to repay such a backstop. Finally, ECB took actions to help address the issue of non-performing loans in the form of the publication of guidance for banks and the call for the preparation of a blueprint for an asset management company, to be implemented at the national level.
  • Creation of a regulatory framework for non-bank activities. At the global level, ECB contributed to the work undertaken under the aegis of the Committee on the Global Financial System of the BIS on the functioning of the repurchase agreement (repo) market by providing an in-depth analysis of the impact of regulatory reforms on repo markets. ECB also actively supported the work of FSB and IOSCO to address the structural vulnerabilities arising from asset management activities. ECB supports the work aimed at ensuring that the prudential regime correctly captures all of the risks relevant to prudential supervision, as well as any systemic risks posed by investment firms.
  • Review of the European System of Financial Supervision. ECB contributed to the review of the European System of Financial Supervision (ESFS) and published its Opinion on the review of the ESRB Regulation on March 02, 2018.

 

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Keywords: Europe, EU, Banking, Annual Report, Supervisory Activities, ECB

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