EY Navigating Banking Union: EU · PDF fileNavigating Banking Union EU Supervision 1. ... The...
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Navigating Banking Union EU Supervision
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Transcript of EY Navigating Banking Union: EU · PDF fileNavigating Banking Union EU Supervision 1. ... The...
Navigating Banking UnionEU Supervision
ContentsBanking Union: a revolution 1
Impact on banks 2
EY’s response 3
Team 5
Banking Union: a revolutionThe European Union’s (EU) commitment to create a safer and more integrated banking sector has led to an enormous change in how banks are supervised and managed when failing.
Within the Eurozone, the start of Banking Union in 2014 launched a programme to integrate the vast majority of responsibility for bank oversight and remediation into two powerful European organizations — the Single Supervision Mechanism (SSM) and Single Resolution Mechanism (SRM).
Across the EU, a single supervisory rule book, monitored by the European Banking Authority (EBA), now binds all financial actors. This rule book is also the foundation on which Banking Union sits.
Single Supervisory Mechanism (SSM) Single Resolution Mechanism (SRM)
► The SSM makes the ECB (in Frankfurt) the central prudential supervisor for all 6,000+ Eurozone banks.
► Within the SSM, the ECB is supported by existing Eurozone national supervisors in its work.
► As of 4 November 2014, the ECB directly supervises 123 of the Eurozone’s largest banks, and remains indirectly responsible for the remainder through existing national authorities.
► Authority and ultimate responsibility for the SSM rests with the ECB and not with the national authorities.
► The ECB should ultimately house 1,000 staff in its supervision wing.
► The SRM applies to all banks covered by the SSM and is responsible for resolution planning and implementation if required.
► The Single Resolution Board (SRB) is responsible for resolution planning and taking resolution decisions for entities which are directly supervised by the ECB, for cross-‐border groups. It sits in Brussels.
► The SRM will become fully operational on 1 January 2016 and will ultimately house 300 staff.
► A Single Resolution Fund (SRF) will also start in 2016, and act as a shared backstop for failing Eurozone banks. It aims to be fully funded by bank contributions within eight years (target is around €55b or 1% of covered deposits).
Banking Union
1Navigating Banking Union EU Supervision
Foundation: Single Rule BookThe Single Rule Book is the legislative texts that all financial institutions in the European Union must abide by. These rules, among other things, regulate capital and liquidity requirements for banks, depositor protection and recovery and resolution.
The EBA’s (sited in London) main task is to contribute to the creation of the Single Rule Book. The Authority also plays an important role in promoting convergence of supervisory practices and is mandated to assess risks and vulnerabilities in the EU banking sector. Its overall objectives are to maintain financial stability in the EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector.
Impact on banksThe SSM, SRM and banks will all be adjusting to this remarkable shift. Many of the rules, relationships, expectations and conventions of previous regimes are being cast aside. The level of adjustment will vary from country to country, but ultimately banks can expect to be judged objectively and thoroughly against the new supervisory framework and their peers across the Eurozone.
The SSMDaniele Nouy, the chairperson of the SSM, has stated that supervision will be “consistent” across the Eurozone and “tough, intrusive but fair.” Significant banks have all been assigned their own Joint Supervision Team (JST), which is led by non-local ECB officials. Banks should consider:
► Decision making is removed from direct influence of local stakeholders. Pressure for corrective actions is expected to be more immediate.
► SSM is aiming to be a robust supervisor. The expectation is that SSM adopts an intrusive, forward-looking approach to the supervisory engagement process. This will support a drive towards consistency, transparency and use of peer benchmarking.
► Engagement will be centralized and intensive. A JST will supervise each bank, headed by the SSM, through which engagement is managed.
The SRMThe SRM will provide a similar level of consistency to recovery and resolution planning and implementation. Its five-person board first met in March 2015 and will be focused on resolution planning for significant banks and building up its resolution implementation structures. Banks might consider whether their:
► Recovery and Resolution Plans will stand up to enhanced SRB scrutiny.
► Likely MREL (Minimum Requirement for Own Funds and Eligible Liabilities), which ensures a bank holds enough money to recapitalise a firm after resolution if necessary, impacts other regulatory targets and their business plan.
► Structure could result in the SRB applying measures to remove possible obstacles for resolvability.
2 Navigating Banking Union EU Supervision
EY’s responseWe have long believed within our EMEA Financial Services Network that we have a significant role to play in the understanding, debate and engineering of how we can all build better working financial markets.
We have deep knowledge and specialism across financial markets due to our work with governments, supervisors, international bodies and commercial institutions. Our aim is to bring our insights, specialism and support to all actors in this space, be it supporting supervisors in designing practices or supporting banks in building new businesses.
As a result of the continuing important of European institutions, legislation and supervision in financial services, EY’s Government Unit is bringing together all our expertise across Europe into the Government EU Centre. The Centre focuses on the European Union’s work in financial services at a Commission, Parliament and Authority level. It is made up of colleagues permanently based in the home cities of the European Supervisory Authorities (Frankfurt, Paris and London) as well as Brussels.
A key focus for the EU Centre is Banking Union. We have enhanced our capacity of cross-border response, sharing of best practice, identifying best resources across the across our firm, with our local supervisory experts (overleaf) now sharing all our knowledge across the Eurozone with each other and our clients. The network is a cross-functional team, combining experts with regulatory experience and advisory expertise, focusing on mapping out the regulatory landscape. Please do get in contact with the central team or any of the network with any queries you have.
European-wide experience centralized under the FS Government EU Centre
EU
European presence in main cities
Cross-functional team
3Navigating Banking Union EU Supervision
Friedrich HiefAustria, Partner Tel: + 43 664600031352 Email: [email protected]
Philippe DesombereBelgium, PartnerTel: + 324 7649 4951Email: [email protected]
Savvas PentarisCyprus, PartnerTel: + 357 9945 1569Email: [email protected]
Olesia AbramovaEstonia, Director Tel: + 372 503 0205Email: [email protected]
Antti HakkarainenFinland, PartnerTel: + 358 405924433Email: [email protected]
Luc ValverdeFrance, PartnerTel: + 336 8259 3276Email: [email protected]
Martina Dombek Germany, PartnerTel: + 49 160 939 26446Email: [email protected]
Eric TourretGreece, PartnerTel: + 306 949190963Email: [email protected]
Cormac MurphyIreland, PartnerTel: + 353 866010620Email: [email protected]
Daniele ZamboniItaly, PartnerTel: + 393 358167084Email: [email protected]
Andris LaucinsLatvia, PartnerTel: + 371 2925 9389Email: [email protected]
Jonas AkelisLithuania, PartnerTel: + 370 6994 0222Email: [email protected]
Bernard LhoestLuxembourg, PartnerTel: + 352 6918 30341Email: [email protected]
Ronald AttardMalta, PartnerTel: + 356 2134 2134Email: [email protected]
Alexander BeijerNetherlands, PartnerTel: + 316 2908 4178Email: [email protected]
Rita CostaPortugal, PartnerTel: + 351 217 912 000Email: [email protected]
Dalimil DraganovskýSlovakia, PartnerTel: + 421 9047 92207Email: [email protected]
Janez UranicSlovenia, PartnerTel: + 386 5134 8938Email: [email protected]
Jose Carlos Hernandez BarrasusSpain, PartnerTel: + 353 8660 10620Email: [email protected]
EY approach: integrated centre
4 Navigating Banking Union EU Supervision
John ColeTransaction Advisory ServicesTel: + 44 20 7951 3118Email: [email protected]
Richard BrownFinancial Services Risk Advisory Tel: + 44 20 7951 5564Email: [email protected]
Claus-Peter WagnerFinancial Services AssuranceTel: + 49 6196 996 6512Email: [email protected]
Francesco RomitoFinancial Services AssuranceTel: + 39 3666822605Email: [email protected]
David Doyle Senior EU AdvisorTel: + 44 7584 266 899Email: [email protected]
Philip Middleton Senior Central Banking Advisor Tel: + 44 7802 615005Email: [email protected]
Benoit GerardTAS and Strategy, Customer & Operations LeaderTel: + 32 2 774 61 20Email: [email protected]
Christian LajoieSenior AdvisorTel: + 33 6 88 38 40 73Email: [email protected]
Frank de Jonghe Financial Services Risk AdvisoryTel: + 32 2 774 9956Email: [email protected]
Mario Delgado AlfaroRecovery & Resolution Tel: + 34 915727272Email: [email protected]
David BarkerHead of EU SupervisionTel: + 44 20 7951 2005Email: [email protected]
Dr. Thomas HuertasEY Global Regulatory NetworkTel: + 44 20 7951 2556Email: [email protected]
Shane O’NeilFinancial Services Risk AdvisoryTel: + 44 20 7951 1170Email: [email protected]
Michiel van der LofAccounting Policy Tel: + 31 6 21252634Email: [email protected]
Team
5Navigating Banking Union EU Supervision
EY brings together a dedicated team from across the Eurozone to support Banking Union. The team’s objective is to co-operate closely with national and European governments and authorities as well as financial institutions to share best practices, knowledge and insights and contribute to the evolving European regulatory and supervisory landscape.
Please do get in contact with the Government team or any of the wider network with any queries you have.
EU Supervision network
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EYG No. CQ0221
1594676.indd (UK) 05/15. Artwork by Creative Services Group Design.
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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