Elke König of SRB on Completing the Banking Union
The SRB Chair Elke König published an article on the completion of Banking Union. In the article, she emphasized that we should take a step back and identify further elements, which impede the completion of a full-fledged Banking Union. Once the Banking Union is completed, there is little reason for ring-fencing adds Elke König.
The Single Supervisory Mechanism tasked with reducing the occurrence of crises ex-ante and the Single Resolution Mechanism equipped with common rules for the orderly wind-down of a failing bank ex-post have proven to be two important pillars of Banking Union. The missing third pillar, a common European Deposit Insurance Scheme with appropriate safeguards is a prerequisite for the completion of the Banking Union, as it would harmonize the level of depositor protection in all member states. However, efforts are also needed in other domains. For instance, the divergence of national insolvency laws is a major obstacle toward a full-fledged Banking Union. In the current system, the counterfactual of no-creditor-worse off (NCWO) might produce different results in different countries, depending on the national insolvency regime, and thus negatively impact on the orderly wind-down of a bank. SRB, therefore, encourages legislators to harmonize national insolvency laws. This harmonization would facilitate resolution planning for cross-border banking groups within the Banking Union.
While harmonized rules certainly help to ensure effective supervision and resolution, the consistent enforcement of these rules and close coordination and cooperation among authorities are equally decisive for the functioning of the Banking Union. Hence, the cooperation of ECB and SRB must be improved even further and the updated Memorandum of Understanding will help in this regard. Moreover, the cooperation and monitoring between the individual national competent and resolution authorities and their interaction at the European level requires further intensified efforts. Thus, the trust of national authorities in the effectiveness of the European supervisory and resolution regime is expected to be considerably strengthened. Overcoming the outlined obstacles to the fragmentation of the Banking Union can be a major contributor to financial stability, enhance resolvability, and depositor protection and help build trust and confidence in the functioning of the Banking Union among the different national authorities.
Related Link: Article
Keywords: Europe, EU, Banking, Banking Union, SSM, Ring Fencing, SRB
Previous Article
DNB Publishes Banking and Insurance Newsletters for April 2018Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards