Featured Product

    Ed Sibley of Ireland on Comprehensive Approach to Financial Stability

    May 03, 2019

    Ed Sibley, the Deputy Governor (Prudential Regulation) of the Central Bank of Ireland, spoke about how new measures to address financial stability have changed and discussed how supervision promotes and contributes to safeguarding financial stability. He highlighted that a comprehensive approach to financial stability is needed for all segments of the financial system—not just at the national level but also at a European level. In addition to outlining the priorities for Banking Union, he said that more needs to be done in Europe with respect to resolution, deposit insurance, Capital Markets Union, and the cultures within financial institutions.

    Mr. Sibley highlighted the increasing importance of non-bank finance. Since the crisis in 2008, globally (as reported by FSB), banks’ share of total global financial assets has declined from 45% to 39%, as other financial intermediaries take larger shares (from 26% to 31%). This evolution can bring with it different types of systemic risks, which can threaten financial stability, be they via direct exposures or indirect exposures. In terms of supervision, it means all sectoral supervisors must have a wider view of the financial system in which firms are operating. Supervisors must increasingly focus on macro-financial dynamics while financial stability assessments must be fully embedded in supervisory risk frameworks. It also means that where national competent authorities for banking are separate from funds or insurance for example, they must cooperate more intensively. This is not easy to achieve. However, to maintain financial stability a holistic perspective is required and an integrated approach must be pursued.

    Mr. Sibley noted that, since the crisis, progress has been made to increase financial stability in the EU and euro area—initially with the establishment of the European System of Financial Supervision encompassing the ESAs and ESRB and then with the establishment of the Banking Union—notably with the establishment of the Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM). However, he said that the job is not yet complete and outlined a few priority areas, including the following:

    • Significant work is required in the banking sector to ensure adequate risk reduction in the level of non-performing loans and a build-up of Minimum Requirement for own funds and Eligible Liabilities, or MREL.
    • The issue of liquidity in resolution will need to be addressed within Banking Union to ensure there is a lender of last resort to provide liquidity support if and when required.
    • More is needed to ensure that banks are resolvable without recourse to the taxpayer. Therefore, the second pillar of Banking Union remains incomplete.
    • The third pillar of the Banking Union—a European Deposit Insurance Scheme or EDIS—remains missing. Deposit protection should transfer to the European level, as has already happened with banking supervision and bank resolution.
    • Completing the Capital Markets Union should also be a priority. Deep and liquid capital markets have the potential for private risk-sharing to smooth economic shocks, thus increasing stability.

    He mentioned that much has changed for prudential supervision in response to the measures enacted to preserve financial stability going forward. In the years ahead, it is expected from regulators and supervisors of all segments of the financial sector, from central banks, from macro-prudential authorities, from resolution authorities, and indeed from governments to ensure that the right legislative and institutional frameworks and incentives exist for a stable financial system.


    Related Link: Speech

    Keywords: Europe, EU, Ireland, Banking, Insurance, Securities, Systemic Risk, Financial Stability, Banking Union, Capital Markets Union, NPLs, MREL, Central Bank of Ireland, BIS

    Featured Experts
    Related Articles
    News

    BCBS Consults on Revised Disclosures for Market Risk Framework

    BCBS launched a consultation on the revised disclosure requirements for the market risk framework for banks.

    November 14, 2019 WebPage Regulatory News
    News

    BCBS Consults on Disclosure Templates of Sovereign Exposures of Banks

    BCBS published a consultation on the voluntary disclosure templates related to sovereign exposures of banks.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II

    PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II.

    November 14, 2019 WebPage Regulatory News
    News

    FSB Examines Implementation of Resolution Regimes in Financial Sector

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work.

    November 14, 2019 WebPage Regulatory News
    News

    IAIS Adopts ComFrame, ICS, and Holistic Framework for Systemic Risk

    IAIS adopted a comprehensive set of reforms—Common Framework (ComFrame), Insurance Capital Standard (ICS) Version 2.0, and Holistic Framework for Systemic Risk—that will enable effective cross-border supervision of insurance groups and contribute to global financial stability.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Templates for Statistical Disclosures Under Solvency II

    PRA published templates for statistical disclosures, as required under Article 31(2) of the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    News

    EC Rule on Calculation of Technical Provisions Under Solvency II

    EC published the Implementing Regulation (EU) 2019/1902 that lays down technical information for calculation of technical provisions and basic own funds for reporting with reference dates from September 30, 2019 until December 30, 2019, in accordance with the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    News

    Regulatory Authorities Remark on IAIS Reforms for Insurance Sector

    FSB welcomed the finalization of the IAIS holistic framework for systemic risk in the insurance sector, for implementation in 2020. EIOPA welcomed the adoption of ComFrame, Insurance Capital Standard (ICS) Version 2.0, and the holistic framework for the assessment and mitigation of systemic risk in the insurance sector.

    November 14, 2019 WebPage Regulatory News
    News

    BIS and MAS Launch Innovation Hub in Singapore

    BIS and MAS launched the BIS Innovation Hub Center in Singapore.

    November 13, 2019 WebPage Regulatory News
    News

    FASB Approves Guidance to Assist in Transition to New Reference Rates

    FASB approved an Accounting Standards Update (Topic 848) to provide temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the reference rate reform on financial reporting.

    November 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4150