Dr. Andreas Dombret of Bundesbank spoke at the Institute of International Bankers, Annual Washington Conference, Washington DC on March 05, 2018. He shared his perspective on the future of U.S.-EU financial relations, following the finalization of Basel III. In context of the U.S.-EU financial relations, Dr. Dombret highlighted that tension between the global and national levels creates political uncertainty.
He said that “Bankers are asking how much of Basel III will be implemented in their jurisdictions and wondering about the individual paths that some countries will take.” He also outlined developments in three crucial areas of future cooperation: the breadth and depth of financial globalization and cross-border banking, global regulatory standards, and supervisory cooperation. Talking about the limits of global regulatory standards, he said that “Only if both the United States and the European Union keep their word and implement Basel III faithfully—and in its entirety, which means including the Fundamental Review of the Trading Book—we will avoid regulatory conflict or arbitrage and be able to provide a reliable framework for international banks.” Basel III represents minimum standards for internationally active banks. Consequently, jurisdictions are free to apply a different set of rules to smaller, only nationally active banks that pose no threat to international financial stability. The majority of countries already have less restrictive rules in place for smaller banks to reduce the operational burden imposed on them. Dr. Dombret added that he is a strong proponent of extending this proportionality further, because the highly complex regulatory reforms introduced in the wake of the financial crisis were intended for global banks and overburden smaller, regional banks.
With regard to supervisory cooperation, he said that an example for more divergence is likely to be higher demands for licensing foreign bank branches and subsidiaries. He referred to the discussion about introducing an EU intermediate holding company, or IHC, equivalent regime. EU has been debating a draft law proposing the establishment of what are referred to as intermediate parent undertakings, or IPUs. Similar to the U.S. IHCs, foreign banks would have to bring their EU operations under a single holding company. “This instrument is by no means intended to make market entry more difficult for foreign banks—and the Bundesbank will continue to advocate fair access for foreign banks." Trilateral cooperation—between U.S., UK, and EU authorities—will become crucial to get a full picture of what is going on at global banks. He concluded: “we should honor the commitment made in the context of finalizing Basel III while nevertheless accepting its limitations for non-international banks; and we should overcome our reservations about close supervisory coordination, as this will become more important in the future. The future of U.S.-EU financial relations will be more complicated. But this complication could prove beneficial—rather than leading us into an ice age, it could help our relationship mature.”
Related Link: Speech
Previous ArticlePRA Issues PS16/18 on Changes to Reporting Requirements for Insurers
Next ArticleDNB Issues Insurance Newsletter for May 2018
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.
APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.
EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.
The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.
FSB published a progress report on the implementation of reforms to major interest rate benchmarks, including the London Inter-bank Offered Rate (LIBOR) benchmark.