Featured Product

    Andrea Enria of ECB Speaks on Principles of Banking Supervision

    March 07, 2019

    While speaking at the SSM and EBF Boardroom dialog in Frankfurt, Andrea Enria, Chair of the Supervisory Board of ECB, discussed the benefits of integration and Banking Union, the priorities for Single Supervisory Mechanism (SSM), and the ECB approach to supervision of banks.

    Andrea Enria mentioned the benefits of integration in EU market and highlighted that banking union was launched to address the adverse feedback loop between banks and their sovereigns and to ensure that banks more effectively meet the needs of corporates and households throughout a crisis. However, despite the progress achieved, the European banking sector is still fragmented, as the restructuring process has taken place mainly along national lines. Mr. Enria pointed out that many of the decisions required to advance the integration of European banking markets lie outside the remit of supervisors. Despite the progress toward a much more harmonized regulatory framework and a single rulebook directly applicable across EU, in certain important areas the progress is falling short of what is needed. If the aim is to have a truly European banking sector, banking groups should be allowed to freely allocate their regulatory capital and their liquidity within the euro area. However, there is still reluctance to remove existing barriers.

    Mr. Enria added that important priorities for the Single Supervisory Mechanism, or SSM, have been well-defined and call for continued focus and effort on the part of both supervisors and firms. The cleaning-up of balance sheets must be completed, the issue of high levels of non-performing loans (NPLs) needs to be resolved, the new BCBS framework for market risk might have to be implemented in a period of heightened volatility, and the robustness of internal risk measurement and management must remain a central focus of the supervisory work. The review of internal models—known as the TRIM project—will be completed this year, but the follow-up to its findings, coupled with the implementation of the standards and guidelines developed by EBA, will keep supervisors and banks busy for quite some time. He emphasized that greater consistency and reliability of risk-weighted asset calculations is needed to foster good risk management practices and fully restore the credibility of the regulatory and supervisory framework. He then discussed how Brexit will change the shape of the banking sector. He said: "To me, one thing is clear: post-Brexit, withholding cooperation is no solution. UK and EU supervisors must find ways to work together toward a safe and sound banking sector. And I can reassure you that constructive solutions are being found.”

    Next, he discussed the ECB approach to supervision and highlighted that ECB decisions are based on both rules and judgment. He also added that European banking supervisors must be accountable and transparent. Banks, investors, and the public must be able to understand banking supervisors' principles and policies. Only then will they be able to anticipate supervisors’ actions and expectations. Take the supervisory review and evaluation process (SREP), for example. The SREP is ECB’s core tool for assessing the risks of each bank and determining its Pillar 2 requirements. He believes that ECB has made a commendable effort to become more transparent on its SREP methodology. Also, he noteed that practices on the disclosure of Pillar 2 requirements vary widely. In some cases, no information is disclosed, even though it is essential for determining the triggers that may lead to suspending coupons or to converting Additional Tier 1 instruments into equity. Breaching Pillar 2 requirements can also trigger a “failing or likely to fail” assessment, with direct consequences for all categories of investors and possibly even for uninsured depositors. Thus, greater transparency would be warranted.

     

    Related Link: Speech

     

    Keywords: Europe, EU, Banking, Stability and Integration, NPLs, SSM, Banking Union, Banking Supervision, ECB

    Related Articles
    News

    PRA Revises Branch Return and Updates Guidance for Regulatory Reports

    PRA published the policy statement PS17/19, which contains the final policy related to changes in the format and content of the Branch Return Form and reporting guidance.

    September 12, 2019 WebPage Regulatory News
    News

    FINMA Outlines Treatment of Stablecoins in Supplement to Guide on ICO

    FINMA published a supplement to its initial coin offerings (ICOs) guidelines, outlining the treatment for stablecoins under the Swiss supervisory law.

    September 11, 2019 WebPage Regulatory News
    News

    Ursula von der Leyen Presents Structure of Next European Commission

    President-elect Ursula von der Leyen has presented her team and the new structure of the next European Commission.

    September 10, 2019 WebPage Regulatory News
    News

    FED Proposes to Revise and Extend Reporting Form on Systemic Risk

    FED proposed to extend for three years, with revision, the Banking Organization Systemic Risk Report (FR Y-15; OMB No. 7100-0352).

    September 10, 2019 WebPage Regulatory News
    News

    EBA Issues Revised List of Validation Rules for Reporting

    EBA published the revised list of validation rules (version 2.9) in its implementing technical standards on supervisory reporting.

    September 10, 2019 WebPage Regulatory News
    News

    Bundesbank Publishes Supplementary Validation Rules for Reporting

    Bundesbank published the updated document containing supplementary validation rules in the context of the implementation of the reporting system at national level.

    September 10, 2019 WebPage Regulatory News
    News

    APRA Licenses Xinja Bank as Authorized Deposit-Taking Institution

    APRA granted Xinja Bank Limited a license to operate as an authorized deposit-taking institution without restrictions, under the Banking Act 1959.

    September 09, 2019 WebPage Regulatory News
    News

    FDIC Proposes Revisions to Regulations on Interest Rate Restrictions

    FDIC proposed revisions to its regulations covering interest rate restrictions that apply to less than well-capitalized insured depository institutions.

    September 09, 2019 WebPage Regulatory News
    News

    EBA Intends to Clarify End-Treatment of Grandfathered Instruments

    EBA announced its intention to clarify the prudential treatment applicable to own funds instruments at the end of the grandfathering period, which expires on December 31, 2021.

    September 09, 2019 WebPage Regulatory News
    News

    IMF Releases Reports on 2019 Article IV Consultation with Saudi Arabia

    IMF published its staff report and selected issues report in context of the 2019 Article IV consultation with Saudi Arabia.

    September 09, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3799