Elke König of SRB on Financial Integration and Consolidation of Banks
The SRB Chair Elke König published an article in The Eurofi Magazine and the article discusses the implications of bank consolidation and the challenges to be addressed by regulators toward financial integration in the Banking Union. From the perspective of SRB, whose mandate focuses on achieving resolvability of banks, having strong European banks is a natural aspiration. She highlighted that consolidation can improve diversification of risks in banking groups, increase bank access to capital markets, and decrease their funding cost, ultimately facilitating the build-up of loss absorption capacity to meet the minimum requirement of eligible liabilities (MREL).
Cross-border banks can play the important role of reducing risks through private risk-sharing in the Banking Union. Consolidation in the banking sector should not be seen as a shortcut to avoid necessary reforms. It is crucial for a resolution authority that consolidation facilitates, instead of hindering, the resolvability of a bank, in line with the resolvability expectations of SRB. In addition, the establishment of the institutional infrastructure of the Banking Union can also be seen as a favorable element. Even though the third pillar, common deposit insurance, is yet to be built, a single supervisory mechanism and a single resolution mechanism are up and running.
However, financial integration within the Banking Union is still lagging behind. There are challenges that could be addressed by policymakers and regulators. The harmonization of relevant legislation, such as insolvency proceedings, could also contribute to remove barriers for the cross-border consolidation of banks. Rule-makers and regulators should resist the temptation of ring-fencing capital and liquidity resources, as this can lead to sub-optimal location and rigidity in the deployment of such resources. Regrettably, the recently agreed banking package does not mark a step forward on this aspect. Rather, it runs the risks of, first, fragmenting decision-making in the Banking Union on external MREL, and second, ring-fencing of internal MREL. SRB already invests and will continue to invest significant resources to reach joint decisions with national authorities on resolution plans, on calibration and location of MREL, and on bail-in playbooks.
Related Link: Article
Keywords: Europe, EU, Banking, MREL, Banking Union, Financial Integration, Consolidation of Banks, SRB, Resolution
Previous Article
ECB Updates List of Supervised Entities in EU in May 2019Related Articles
|
News
BCBS and IOSCO Extend Implementation of Final Phase of Margin RulesBCBS and IOSCO agree to one-year extension of the final implementation phase of the margin requirements for non centrally cleared derivatives.
July 23, 2019
WebPage
Regulatory News
|
|
News
APRA Proposes Stronger Remuneration Requirements in AustraliaAPRA is proposing to strengthen prudential requirements for remuneration across all APRA-regulated entities in the banking, insurance, and superannuation industries by issuing CPS 511, a new prudential standard on remuneration.
July 23, 2019
WebPage
Regulatory News
|
|
News
PRA Consults on Availability of Group Own Funds Under Solvency IIPRA published a consultation paper (CP16/19) that sets out its proposed approach to the determination of the availability of subordinated liabilities and preference shares in group own funds.
July 22, 2019
WebPage
Regulatory News
|
|
News
EIOPA Consults on Methodological Principles for Insurer Stress TestingEIOPA published a discussion paper on the methodological principles for stress testing the insurance sector in EU.
July 22, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Rule to Exclude Community Banks from Volcker RuleUS Agencies (CFTC, FDIC, FED, OCC, and SEC) adopted a final rule to exclude community banks from the Volcker Rule, in line with amendments to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.
July 22, 2019
WebPage
Regulatory News
|
|
News
US Agencies Adopt Amendments to Simplify Regulatory Capital RulesUS Agencies (FDIC, FED, and OCC) adopted a final rule that reduces regulatory burden by simplifying several requirements in the regulatory capital rules for banks.
July 22, 2019
WebPage
Regulatory News
|
|
News
IA of Hong Kong Delegates Inspection and Investigation Powers to HKMAHKMA and IA of Hong Kong jointly issued a statement announcing the delegation of the inspection and investigation powers of IA to HKMA, pursuant to the statutory regulatory regime for insurance intermediaries under the Insurance Ordinance.
July 19, 2019
WebPage
Regulatory News
|
|
News
FSB Extends Implementation Timeline for Policy Recommendations on SFTsFSB announced adjustments to the implementation timelines for its recommendations on securities financing transactions (SFTs), specifically those related to the minimum haircut standards for non-centrally cleared SFTs.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: Third Update for July 2019EBA published answers to six questions under the Single Rulebook question and answer (Q&A) tool this week.
July 19, 2019
WebPage
Regulatory News
|
|
News
EBA Report Assesses Regulatory Framework for Fintech ActivitiesEBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.
July 18, 2019
WebPage
Regulatory News
|
