Dr. Andreas Dombret of Bundesbank spoke at the Institute of International Bankers, Annual Washington Conference, Washington DC on March 05, 2018. He shared his perspective on the future of U.S.-EU financial relations, following the finalization of Basel III. In context of the U.S.-EU financial relations, Dr. Dombret highlighted that tension between the global and national levels creates political uncertainty.
He said that “Bankers are asking how much of Basel III will be implemented in their jurisdictions and wondering about the individual paths that some countries will take.” He also outlined developments in three crucial areas of future cooperation: the breadth and depth of financial globalization and cross-border banking, global regulatory standards, and supervisory cooperation. Talking about the limits of global regulatory standards, he said that “Only if both the United States and the European Union keep their word and implement Basel III faithfully—and in its entirety, which means including the Fundamental Review of the Trading Book—we will avoid regulatory conflict or arbitrage and be able to provide a reliable framework for international banks.” Basel III represents minimum standards for internationally active banks. Consequently, jurisdictions are free to apply a different set of rules to smaller, only nationally active banks that pose no threat to international financial stability. The majority of countries already have less restrictive rules in place for smaller banks to reduce the operational burden imposed on them. Dr. Dombret added that he is a strong proponent of extending this proportionality further, because the highly complex regulatory reforms introduced in the wake of the financial crisis were intended for global banks and overburden smaller, regional banks.
With regard to supervisory cooperation, he said that an example for more divergence is likely to be higher demands for licensing foreign bank branches and subsidiaries. He referred to the discussion about introducing an EU intermediate holding company, or IHC, equivalent regime. EU has been debating a draft law proposing the establishment of what are referred to as intermediate parent undertakings, or IPUs. Similar to the U.S. IHCs, foreign banks would have to bring their EU operations under a single holding company. “This instrument is by no means intended to make market entry more difficult for foreign banks—and the Bundesbank will continue to advocate fair access for foreign banks." Trilateral cooperation—between U.S., UK, and EU authorities—will become crucial to get a full picture of what is going on at global banks. He concluded: “we should honor the commitment made in the context of finalizing Basel III while nevertheless accepting its limitations for non-international banks; and we should overcome our reservations about close supervisory coordination, as this will become more important in the future. The future of U.S.-EU financial relations will be more complicated. But this complication could prove beneficial—rather than leading us into an ice age, it could help our relationship mature.”
Related Link: Speech
Previous ArticlePRA Issues PS16/18 on Changes to Reporting Requirements for Insurers
Next ArticleDNB Issues Insurance Newsletter for May 2018
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA published the annual report on asset encumbrance of banks in EU.
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
ECB published a letter from Andrea Enria, the Chair of the Supervisory Board of ECB, answering questions raised by the President of the Bundestag (the German federal parliament) on how ECB assesses the financial stability of the euro area in the context of the significant level of nonperforming loans.