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September 22, 2017

Ignazio Angeloni, Member of the ECB Supervisory Board, at the XXXI Convegno “Adolfo Beria di Argentine” in Courmayeur, spoke about the working and the challenges of the new European banking supervision, as part of the Single Supervisory Mechanism (SSM). He also discussed state of the legal framework of banking supervision in the EU and the crisis management framework of the banking union.

Mr. Angeloni described the way ECB and the national competent authorities work closely together on supervisory matters and examined the legislative framework in which the SSM operates. He added that the EU institutions are engaged in a thorough review of the EU banking legal framework, following proposals tabled last Autumn by EC. The proposed amendments implement important international regulatory standards in European legislation, which rightly push the prudential approach further in the direction of being more risk-sensitive. “ECB fully supports the proposal to grant capital and liquidity waivers within banking groups operating on a cross-border basis in the EU. We see this proposal as consistent with the aims of the banking union project, by promoting the efficient management of resources within the group and fostering banking integration.”

 

He then discussed the two areas in which the EC’s proposals could be improved: one relates to harmonization and the other to supervisory discretion. “EC proposals frame the supervisor’s ability to set capital requirements under Pillar 2 in a manner which is excessively tight in our view. The proposal to frame Pillar 2 decisions in technical standards issued by EBA may prove too restrictive, limiting supervisory flexibility. The proposal also restricts the supervisor’s ability to collect information beyond regular statistical reporting. Ad-hoc gathering of statistical and other information remains essential, especially for a new authority like the SSM. In our experience, this has been invaluable to conduct thematic reviews in less-explored areas of supervision, like, for example, governance and business model comparison.” Regarding harmonization, he said that establishing a level playing field is impossible if the single supervisor needs to apply different legal frameworks in different countries. “The legislator can help either by expanding the scope of directly applicable norms, or by placing the in-built margins of flexibility of the legislation in the hands of the supervisory authority; in this case, ECB can at least harmonize rules at the SSM level. This was done last year, in part, in our policy on options and discretions, which you may be familiar with.”


Mr. Angeloni states that, from an operational point of view, the new crisis management framework has worked. In the context of the crisis management framework, he also discussed a number of points that merit close attention by supervisors going forward. He also added that it may be worth reflecting on ways to give European bank crisis management a more established format, also looking at international best practices. As per his concluding statement, “European supervision is still young and its journey has just started. There are plenty of items in our “to do list” for the years ahead.”

 

Related Link: Speech

Keywords: Europe, EU, Banking, Crisis Management Framework, Banking Union, SSM, ECB

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