Sabine Lautenschläger of ECB on Addressing the Brexit Challenges
ECB published an interview with Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB. This interview was conducted by Claire Jones and Caroline Binham of the Financial Times. She spoke about Brexit in the context of the Single Supervisory Mechanism’s (SSM) expectations for UK institutions looking to establish a base in the eurozone. Challenges regarding supervision of subsidiaries and third-country branches, in the light of Brexit, represented another key area of discussion.
During the interview, Ms. Lautenschläger elaborated on the issue of third-country branches versus subsidiaries, in terms of understanding the difference. She highlighted that how supervision is done can be different, “depending on where you would establish a third-country branch” and it is not harmonized. European rules on establishing a subsidiary are very clear and until now the UK has followed and complied with them. According to Ms. Lautenschläger “… you have your capital requirements and you have your liquidity standards. It’s very clear that the supervisory approach in the euro area for subsidiaries is the same. When a subsidiary is a significant one, it is supervised by us according to our standards; when the subsidiary is less significant it is supervised by the national competent authorities (NCAs), but according to our standards. We have a joint supervisory approach. If it is a third-country branch or if it is an investment firm, it’s under national supervision and under a national regime with regard to capital or liquidity, and you might have countries where you have similar or even the same capital or liquidity demands and, in other countries, it is quite different from a subsidiary.”
The rules around the third-country branches are different because of the national regimes. She thinks that this loophole regarding branches needs to be addressed, “... especially when we are talking about systemic third-country branches... . There are third-country branches under a national regime, which might be very relevant. Then there are subsidiaries of investment firms that can do everything except deposit-taking under a national regime too. And then you have different intragroup exposure rules in the different countries, which are very important too. When you try to book activities in different entities of one structure in the euro area, it might be relevant what kind of intragroup rules and limits you have—these are partly national, partly harmonized.” She also mentioned that the U.S., Switzerland, the UK, and Japan currently have third-country branches in Europe and these are “the most important.”
Related Link: Interview of Sabine Lautenschläger
Keywords: Europe, ECB, Banking, Brexit, Third-Country Branches, Banking Supervision, SSM
Previous Article
CIRC Notice on Interim Measures for Supervision of Credit InsuranceRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
