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September 15, 2017

Sabine Lautenschläger, member of the ECB Executive Board and Vice-Chair of the ECB Supervisory Board, spoke at the Eurofi Financial Forum, on banking supervision. She noted that, with regard to regulation and supervision, Europe has opted for less variety and more harmonization; for example, there is a single European rulebook for banks, a single European supervisor, and a single resolution mechanism. This helps to make banks safe and prepares the ground for a truly European banking sector.

However, she mentions the following less harmonized situations in Europe:

The first thing is the legal basis. Parts of Single Rulebook have been implemented through EU Directives that provide huge incentives to add as much national spice as possible. The rulebook also contains a number of options and discretions. These offer some freedom in applying the rules. As European banking supervisors, we have agreed to exercise many of these options and discretions in a harmonized manner. Still, there are some that lie in the hands of governments—these too need to be harmonized.

The second thing is the scope of supervision. There are very good reasons for supervising specific types of entity at European level. However, these entities are still subject to national supervision and national regulation. The most obvious examples are large investment firms with cross-border, bank-like activities and third-country branches of non-EU banks. In the wake of Brexit, many banks will decide to relocate from the UK to the euro area; they might choose to set up third-country branches. Meanwhile, investment firms might also relocate. Thus, it would make sense to regulate and supervise them at European level.

The third thing is the supervisors’ toolbox, which includes tools that are available in some countries but not in others. The moratorium tool is one example. It is crucial for handling bank failures in a safe way; so, it should become part of a harmonized European toolbox.

 

In the end she concluded, "There is still too much variety. To put it another way, there are too many differences when it comes to regulation and supervision in Europe. Such diversity can only be justified when it reflects country-specific risks. And that is not always the case. So, if we are serious about the banking union, we must strive for more harmonization."

 

Related Link: Speech

Keywords: Europe, Banking, Banking Supervision, Single Rulebook, ECB

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