Should supervisors allow capital waivers to be used within European cross-border banking

• Autorzy: Piotr Bednarski , Brian Polk
• Języki publikacji: EN

Abstrakty

EN

A common theme in recent public European Union (EU) policy debates is improving integration of the EU financial sector. The suggestion is that the Euro area should be treated as if it were a single jurisdiction, across which banks should be able to centralise management of capital and liquidity. Financial fragmentation is said to trap capital and liquidity in local subsidiaries in Host countries which is suboptimal, hindering the cross-border provision of credit, and resulting in an inefficient economic allocation, with higher costs for customers, and lower profitability for the industry in the EU. The proposed policy involves measures to counteract ring-fencing of subsidiaries by Member States (MS), curtailing national options and discretions that limit the harmonization effects of the EU's Single Rulebook, and other regulations and supervisory practices that reduce banking groups' cross-border freedom. However, some of the national options affecting banks in the EU are still supported by MS as needed due to local risks, financial stability concerns. Cross-border banking, often used as a yardstick to gauge the level of financial integration in the EU, can currently be realized in the EU in three basic forms: via subsidiaries, via passported branches or via cross-border provision of services. Among the solutions to fragmentation that many EU policy makers and governments focus on, at least in the Eurozone (EZ), are: completion of the Banking Union (BU), adopting regulations allowing capital, liquidity and MREL waivers in subsidiaries across borders, and the reduction of national options. In November 2016, the European Commission (EC) proposed changes to Capital Requirements Regulation (CRR), Capital Requirements Directive IV (CRD IV) and Bank Resolution and Recovery Directive (BRRD) which would have allowed, under certain conditions (e.g. subject to guarantees), the application of capital, liquidity and MREL (Minimum Required Eligible Liabilities) waivers in the subsidiaries of EU banks operating in EU MS. These propositions faced strong opposition and were not ultimately adopted in the recently published CRR 2.0, CRD V and revised BRRD, due to lack of consensus among MS. But the arguments in favour of change have not disappeared. In this paper, we start with a look at the current state of financial integration in Europe. We then examine the arguments for and against the use of waivers. Building on these arguments, we subsequently explain sensible preconditions that should be put in place - in addition to completing the BU - to allow the prudent use of such waivers. We also discuss alternatives to the use of waivers, based on expanding the use of branches and indicate incentives which can play a role in shaping the quality of cooperation between Home and Host supervisors.(original abstract)

Słowa kluczowe

EN

Financial services market; Financial sector; Financial market supervision; Monetary Policy of the ECB

PL

Rynek usług finansowych; Sektor finansowy; Nadzór nad rynkiem finansowym; Polityka pieniężna Europejskiego Banku Centralnego

• Czasopismo: Bezpieczny Bank
• Rocznik: 2019
• Numer: nr 4 (77)
• Strony: 23--49

Twórcy

autor

Piotr Bednarski

• PwC

autor

Brian Polk

• PwC UK

Bibliografia

• Anginer D., Cerutti E., Soledad Martinez Peria M., (2017), Foreign Bank Subsidiaries' Default Risk during the Global Crisis: What Factors Help Insulate Affiliates from their Parents?, IMF Working Paper Research Department.
• Bednarski P., Bielicki G. (2007), Home and Host supervisors' relations from Host supervisors' perspective, Cross-border banking. Regulatory challenges, ed. G. Caprio, D.D. Evanoff, G.G. Kaufmann, World Scientific.
• Belgium: Financial Sector Assessment Program. Technical Note - Banking, Insurance, and Financial Conglomerates supervision, IMF Country Report No. 18/70, March 2019, https://www.imf.org/~/media/Files/Publications/CR/2018/cr1870.ashx.
• Considerations of the further strengthening of the Banking Union, including a common deposit insurance scheme, June 2019, Report of the HLWG Chair, https://www.consilium.europa.eu/media/39768/190606-hlwg-chair-report.pdf.
• Consolidated version of the Treaty on the Functioning of the European Union (2012), https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12012E/TXT&from=EN.
• Core Principles Methodology, Basel Committee on Banking Supervision, 2006.
• Deslandes J., Dias C., Magnus M. (2019), Banking Union: What next?, European Parliament, ECONOMIC GOVERNANCE SUPPORT UNIT (EGOV), Directorate-General for Internal Policies PE 634.374 http://www.europarl.europa.eu/RegData/etudes/IDAN/2019/634374/IPOL_IDA(2019)634374_EN.pdf.
• Domanski D., Three priorities for international regulatory and supervisory cooperation, Financial Stability Board, remarks delivered at Eurofi conference, September 13, 2019, link: https://www.fsb.org/wp-content/uploads/S130919.pdf.
• Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, link: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CEL-EX:32013L0036&from=PL.
• D'Hulster K., Cross Border Banking Supervision Incentive Conflicts in Supervisory Information Sharing between Home and Host Supervisors, The World Bank, Policy Research Working Paper 5871, 2011.
• Emter L., Schmitz M., Tirpák M., Cross-border banking in the euro area since the crisis: what is driving the great retrenchment?, Financial Stability Review, ECB 2017.
• Enria A., Fragmentation in banking markets: crisis legacy and the challenge of Brexit, September 2018 https://eba.europa.eu/documents/10180/2353431/Andrea+Enria+speech+o-n+Fragmentation+in+banking+at+BCBS-FSI+High+Level+Meeting+170918.pdf.
• Iceland triumphs in Icesave court battle, Financial Times (28.01.2013), link Iceland triumphs in Icesave court battle.
• Judgement of the EFTA Court 28 January 2013, Case E-16/11, EFTA Surveillance Authority, supported by the European Commission versus Iceland, link https://eftacourt.int/downlo-ad/16-11-judgment/?wpdmdl=1260&masterkey=.
• Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements and amending Regulation (EU) No 648/2012, Brussels 23.11.2019, https://eur-lex.europa.eu/resource.html?uri=cellar:9b17b18d-cdb3-11e6-ad7c-01aa75ed71a1.0001.02/DOC_1&format=PDF.
• Quarles Randal K. (2019), Government of Union: Achieving Certainty in Cross-Border Finance - remarks at Financial Stability Board Workshop on Pre-Positioning, Ring-Fencing, and Market Fragmentation Philadelphia, Pennsylvania, September 26, 2019, link: https://www.fsb.org/wp-content/uploads/S260919.pdf.
• Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
• Schmitz M, Tirpák M., Cross-border banking in the euro area since the crisis: what is driving the great retrenchment? Financial Stability Review - Special Features B, ECB 2017.
• Statement of opinion with regard to Nordea Bank AB's application for permission to implement merger plans, Finansinspektionen, July 4, 2018, link: https://www.riksbank.se/globa-lassets/media/remisser/riksbankens-remissvar/engelska/2018/statement-of-opinion-wi-th-regard-to-nordea-bank-abs-application-for-permission-to-implement-merger-plans.pdf.
• The Economist (14.09.2002), Rogue trader, rogue parent, link Rogue trader, rogue parent.

Identyfikatory

DOI

10.26354/bb.2.4.77.2019