General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
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 Insights
News

BCBS Finds Liquidity Risk Management Principles Remain Fit for Purpose

BCBS completed a review of its 2008 Principles for sound liquidity risk management and supervision. The review confirmed that the principles remain fit for purpose.

January 17, 2019 WebPage Regulatory News
News

HKMA Urges Local Banks to Start Working on FRTB Implementation

HKMA announced that it plans to issue a consultation paper on the new market risk standard in the second quarter of 2019.

January 17, 2019 WebPage Regulatory News
News

EBA Finalizes Guidelines for High-Risk Exposures Under CRR

EBA published the final guidelines on the specification of types of exposures to be associated with high risk under the Capital Requirements Regulation (CRR). The guidelines are intended to facilitate a higher degree of comparability in terms of the current practices in identifying high-risk exposures.

January 17, 2019 WebPage Regulatory News
News

MAS Guidelines on Risk Mitigation Requirements for OTC Derivatives

MAS published guidelines on risk mitigation requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts.

January 17, 2019 WebPage Regulatory News
News

BoE Publishes the Schedule for Statistical Reporting for 2019

BoE published the updated schedule for statistical reporting for 2019. The reporting institutions use the online statistical data application (OSCA) to submit statistical data to BoE.

January 16, 2019 WebPage Regulatory News
News

PRA Delays Final Direction on Reporting of Private Securitizations

PRA and FCA have delayed the issuance of final direction, including the final template, on reporting of private securitizations, from January 15, 2019 to the end of January 2019.

January 15, 2019 WebPage Regulatory News
News

SNB Updates Forms on Supervisory Reporting for Banks

SNB published Version 1.7 of reporting forms (AUR_U, AUR_UEA, AUR_UES, AURH_U, AUR_K, AUR_KEA, and AURH_K) and the related documentation for supervisory reporting on an individual and consolidated basis.

January 15, 2019 WebPage Regulatory News
News

BCBS Finalizes Market Risk Capital Framework and Work Program for 2019

BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework and impact of the framework.

January 14, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for January 2019

EBA published answers to 13 questions under the Single Rulebook question and answer (Q&A) updates for this week.

January 11, 2019 WebPage Regulatory News
News

PRA Proposes to Amend Supervisory Statement on Credit Risk Mitigation

PRA published the consultation paper CP1/19 that is proposing changes to the supervisory statement (SS17/13) on credit risk mitigation.

January 10, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2473