Featured Product

    Sabine Lautenschläger of ECB on Risk Reduction in the Euro Area

    May 04, 2018

    Sabine Lautenschläger of ECB examined the role of the European banking union in risk reduction in the euro area. She highlighted the need for a harmonized regulatory framework to "reap the full benefits of the banking union."

    First, she discussed the issue of options and national discretions (ONDs). While some of these ONDs have been harmonized by supervisors, others lie in the hands of national legislators. Waivers for large exposure limits, for instance, are still fragmented across the euro area. This in turn affects other cross-border waivers, such as that on liquidity requirements. More generally, it stands in the way of a truly European banking market, as do the other ONDs that fall within the competence of national legislators. Second, she examined the need to further harmonize the tools for crisis management. For instance, the overlap between standard supervisory measures and early intervention measures must be removed. As there exists an obligation to apply the least intrusive tool, the overlap often prevents us from taking early intervention measures. Additionally, the toolbox needs to be expanded to include a harmonized moratorium tool. Finally, national insolvency laws need to be aligned. All this would make the Single Resolution Mechanism even more effective.

    These measures will help to better contain risks in the future. However, other existing risks must be reduced too. Nonperforming loans (NPLs) pose one of the biggest risks to the European banking sector. She believes that NPLs requires a joint effort by banks, supervisors, and legislators. NPLs need to be dealt with, first and foremost, by the banks and more work needs to be done in this area. In addition, supervisors need to play their part. European supervisors closely monitor how banks approach NPLs and ECB published a guidance on the subject in 2017 and 2018. The aim is not only to resolve the current NPL problem, but also to keep it from recurring in the future. Finally, legislators also need to address the issue of NPLs. Across the euro area, legal and judicial systems differ substantially in terms of effectiveness and efficiency when it comes to dealing with NPLs. The time and resources required to resolve NPLs, thus, differ from country to country. National legislators should strive to improve legal and judicial frameworks.

    She concludes: "... there are still things we can do to reduce risks in the euro area... . We must thus be careful not to reach a point where we neither reduce risks nor grow closer together. We have to keep moving on both fronts; only then will we reach our destination of a more stable and prosperous European Union."

     

    Related Link: Speech

    Keywords: Europe, EU, Banking, Banking Union, Options and Discretions, NPLs, Crisis Management, ECB, BIS

    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796