In a recently published article, the Single Resolution Board (SRB) Vice chair Jan Reinder De Carpentier highlighted that more work is urgently needed for a fully integrated system that delivers better crisis management, depositor protection, and a stronger banking sector. He advocated the establishment of a common deposit insurer and a fully mutualized central deposit insurance fund. Urging for the completion of Banking Union, he noted that banks may not yet see the full benefits of the Banking Union because measures have not been agreed to enable deepened cross-border integration, which would then lower their cost base or provide more opportunities.
The SRB Vice Chair noted that SRB has set out key changes to the system to enable the more effective management of bank failures and European Union has put in place a common deposit insurance framework through the Deposit Guarantee Scheme Directive; however, the system still lacks a common deposit insurer. He pointed out that pooling resources at the central level can create a strong fund, which benefits from increased diversification of risks. He notes that a quantitative analysis of the European Deposit Insurance Scheme proposal confirms that a mutualized central fund will be more efficient than many smaller funds and will reduce the risks faced by deposit guarantee schemes. It would also help address the bank-sovereign nexus. Under a fully integrated Banking Union, costs arising for the central fund will be distributed across the European Union, rather than concentrated in one member state, thus reducing the systemic risks and the procyclicality of the system, where costs arising from a bank failure would otherwise mainly fall on banks within the same country. The introduction of a fully mutualized central scheme would also entail having the same rules across member states, with relevant control at the Banking Union level to align management and resources. He emphasized that the way forward is to make progress on all elements in parallel, with European deposit insurance introduced as part of a holistic set of reforms. "This can then deliver a stronger banking sector, more capable of meeting the needs of the European people as we come out of the Covid-19 crisis and begin to invest in the recovery," said Mr. Carpentier.
Related Link: Article on Completion of Banking Union
Keywords: Europe, EU, Banking, Banking Union, Crisis Management, Deposit Insurance, Resolution Framework, EDIS, DGSD, SRB
Previous ArticleFED Paper Explores Fintech Partnership Dynamics in Community Banks
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.