ESRB Report on Macroprudential Policy Implications of Foreign Branches
ESRB published a report that explores macro-prudential policy implications for foreign branches relevant for financial stability. The report discusses the deficiencies in the current legal framework in EU with regard to the exchange and collection of macro-prudential information on foreign bank branches. It discusses the importance of such information exchange from a financial stability perspective and proposes that a framework for the exchange of information on foreign branches for macro-prudential purposes should be further developed at the EU and national levels.
The role of foreign branches in financial intermediation may gradually increase in parallel with the process of financial integration and further progress in the Banking Union. The report discusses the financial stability implications of foreign branches and analyzes the EU legal framework for the exchange and collection of information for macro-prudential purposes. It describes how significant foreign branches are in EU member states and discusses their potential financial stability implications. It then describes the current situation regarding existing definitions, information available, and the framework for the exchange of information on foreign branches within the overall EU legal framework. It also discusses new avenues for requiring and exchanging information on foreign branches. Finally, the report concludes that a framework for the exchange of information on foreign branches for macro-prudential purposes is necessary and should be further developed at the EU and national levels. It also proposes, as the vehicles of this framework, the colleges of supervisors and voluntary arrangements between authorities on the exchange of information within the existing legal framework, such as Memoranda of Understanding.
The report specifies that relevant authorities entrusted with the adoption and/or activation of macro-prudential policy measures or other financial stability tasks could be granted access to information on foreign branches through a voluntary exchange of information based on a mutual agreement between authorities. Well-designed and efficient information-sharing arrangements on foreign branches can facilitate the tasks of host authorities entrusted with the adoption and/or activation of macro-prudential policy measures or other financial stability tasks in several fields, including in the areas of risk analysis, reciprocity, and supervision of measures. The Nordic-Baltic Macroprudential Forum (NBMF), along with the existing Memorandum of Understanding for financial stability in the Nordic-Baltic region, could be considered as a benchmark for a close regional cooperation between macro-prudential authorities.The Memorandum of Understanding on supervision of significant branches in the Nordic-Baltic region provides an example of the development of a coordination framework intended to facilitate cooperation between competent authorities in the region.
Related Link: Report (PDF)
Keywords: Europe, EU, Banking, Systemic Risk, Macro-prudential Policy, Foreign Bank Branches, Financial Stability, Supervisory Cooperation, ESRB
Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
