Featured Product

    Ed Sibley of Ireland on Comprehensive Approach to Financial Stability

    May 03, 2019

    Ed Sibley, the Deputy Governor (Prudential Regulation) of the Central Bank of Ireland, spoke about how new measures to address financial stability have changed and discussed how supervision promotes and contributes to safeguarding financial stability. He highlighted that a comprehensive approach to financial stability is needed for all segments of the financial system—not just at the national level but also at a European level. In addition to outlining the priorities for Banking Union, he said that more needs to be done in Europe with respect to resolution, deposit insurance, Capital Markets Union, and the cultures within financial institutions.

    Mr. Sibley highlighted the increasing importance of non-bank finance. Since the crisis in 2008, globally (as reported by FSB), banks’ share of total global financial assets has declined from 45% to 39%, as other financial intermediaries take larger shares (from 26% to 31%). This evolution can bring with it different types of systemic risks, which can threaten financial stability, be they via direct exposures or indirect exposures. In terms of supervision, it means all sectoral supervisors must have a wider view of the financial system in which firms are operating. Supervisors must increasingly focus on macro-financial dynamics while financial stability assessments must be fully embedded in supervisory risk frameworks. It also means that where national competent authorities for banking are separate from funds or insurance for example, they must cooperate more intensively. This is not easy to achieve. However, to maintain financial stability a holistic perspective is required and an integrated approach must be pursued.

    Mr. Sibley noted that, since the crisis, progress has been made to increase financial stability in the EU and euro area—initially with the establishment of the European System of Financial Supervision encompassing the ESAs and ESRB and then with the establishment of the Banking Union—notably with the establishment of the Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM). However, he said that the job is not yet complete and outlined a few priority areas, including the following:

    • Significant work is required in the banking sector to ensure adequate risk reduction in the level of non-performing loans and a build-up of Minimum Requirement for own funds and Eligible Liabilities, or MREL.
    • The issue of liquidity in resolution will need to be addressed within Banking Union to ensure there is a lender of last resort to provide liquidity support if and when required.
    • More is needed to ensure that banks are resolvable without recourse to the taxpayer. Therefore, the second pillar of Banking Union remains incomplete.
    • The third pillar of the Banking Union—a European Deposit Insurance Scheme or EDIS—remains missing. Deposit protection should transfer to the European level, as has already happened with banking supervision and bank resolution.
    • Completing the Capital Markets Union should also be a priority. Deep and liquid capital markets have the potential for private risk-sharing to smooth economic shocks, thus increasing stability.

    He mentioned that much has changed for prudential supervision in response to the measures enacted to preserve financial stability going forward. In the years ahead, it is expected from regulators and supervisors of all segments of the financial sector, from central banks, from macro-prudential authorities, from resolution authorities, and indeed from governments to ensure that the right legislative and institutional frameworks and incentives exist for a stable financial system.

    Related Link: Speech

    Keywords: Europe, EU, Ireland, Banking, Insurance, Securities, Systemic Risk, Financial Stability, Banking Union, Capital Markets Union, NPLs, MREL, Central Bank of Ireland, BIS

    Featured Experts
    Related Articles

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481