ECB and UK Authorities Agree on Post-Brexit Supervisory Cooperation
ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities. The MoU on post-Brexit supervisory cooperation with the UK authorities becomes effective from January 01, 2021. The ECB MoU with BoE and FCA contains several general and specific provisions, with the specific provisions covering topics such as implementation of internal models, recovery plans, macro-prudential measures, and proportionality. The MoU also addresses cooperation with respect to on-site visits and inspections of cross-border institutions and exchange of supervisory information.
The MoU with UK authorities is aimed at ensuring effective cooperation and exchange of supervisory information for the performance of the authorities' respective supervisory powers over supervised entities, to the extent permitted by their applicable legal framework and in accordance with the highest standards for international supervision. The key relevant provisions in the MoU include the following:
- Cooperation in relation to internal models or advanced approaches. Subject to proportionality considerations, the authorities (ECB, BoE, and FCA) intend to share views and information on the supervised entities’ design and use of internal models, information on data and IT frameworks to ensure that all relevant information is properly reflected into the internal models, and controls and governance of approved internal models.
- Cooperation on ongoing supervision, including sharing of risk assessments. Subject to proportionality considerations, the authorities intend to share information on their risk assessments of supervised entities and their cross-border establishments, where the information is relevant and material to the other authority in the performance of the ongoing supervision. The authorities may invite each other to participate in, and contribute to, an overall group risk assessment.
- Cooperation in relation to on-site visits or inspections to cross-border establishments. The authorities intend to facilitate as far as practicable, and subject to applicable legislation, the conduct of on-site visits or inspections of the cross-border establishments situated in the other authority’s jurisdiction, or, where relevant for such cross-border establishments of the supervised entity, to the latter.
- Collection and exchange of supervisory and other information from the institutions and sharing such information between authorities. Subject to proportionality considerations, the authorities intend to share further information needed for the performance of their ongoing supervisory tasks and responsibilities in relation to the specific supervised entities and their cross-border establishments. Where it is agreed by the Authorities to be relevant and proportionate, such information may include, but is not limited to, capital and liquidity positions; significant failures in a supervised entity’s prudential governance or control arrangements; and material findings from a supervised entity’s internal risk or audit functions relevant to the cross-border establishment.
- Macro-prudential measures. The authorities intend to communicate with each other to exchange relevant information assessments and to facilitate discussions in respect of planned measures where this may assist in assessing and mitigating risks to financial stability in the concerned jurisdictions.
- Assessment of recovery plan. The authorities intend to assist each other in an assessment of the group recovery plan prepared by the supervised entities and, where relevant, their cross-border establishments insofar as it is relevant to the entities or cross-border establishments under their supervision. To facilitate such assessment, the authorities intend to share, in accordance with the applicable legal framework, parts of the recovery plans prepared by the supervised entities or their cross-border establishments that are relevant for the other Authorities.
The agreement with BoE and FCA is one of more than 20 MoUs that ECB Banking Supervision has concluded with banking and market supervisory authorities in Europe and beyond. ECB is published the first group of agreements, including an MoU with the Swedish Financial Supervisory Authority (FI), the Financial Supervisory Authority of Norway (Finanstilsynet), DFSA, and FIN-FSA. Among the non-European authority MoUs, MoUs with Abu Dhabi Global Market’s Financial Services Regulatory Authority, National Bank of Moldova, and Netherlands Authority for the Financial Markets have ben also published. The Governing Council of ECB aims to publish the second group of supervisory MoUs (already signed) by the end of April 2021. These MoUs are a part of the ECB efforts, wherein it negotiates MoUs with national and international authorities to establish stable cooperation and information-sharing frameworks for the coordinated supervision of banks and their cross-border subsidiaries and branches.
Keywords: Europe, EU, UK, Sweden, Denmark, Netherlands, Banking, Supervisory Cooperation, MoU, Post-Brexit, Proportionality, Recovery Planning, Internal Models, BoE, FCA, ECB
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