Verso l Unione Bancaria Europea

Transcription

1 Verso l Unione Bancaria Europea Ignazio Angeloni Conferenza in onore di Marco Onado Modena, 15 gennaio

2 My idea of a bank before knowing Marco Onado 2

3 Twenty years later Narrow monetary union: one currency, governed by an independent central bank No single fiscal or supply-side policies At the time, conflicting views on banking supervision Complement to monetary policy, hence should be centralised Hardwired to national politics, hence decentralised Treaty provisions Banking supervision remained at national level ECB may be assigned specific prudential supervisory tasks, by unanimous Council decision (art ) 3

4 Narrow EMU worked well until 2007 Successful changeover to he new currency Financial integration : Immediate establishment of a single money market Negligible sovereign bond spreads Cross-border bank M/A in the early EMU years Favourable global economic conditions Credit boom in some countries Competitiveness and current account imbalances building up, financed by private capital flows 4

5 Sovereign spreads Sovereign spreads declined, especially in the countries where they had increased the most in the preceding months. Dispersion of euro area ten-year sovereign bond yields (percentages) Sources: Bloomberg and ECB calculations. 5

6 Target imbalances Source: ECB, NCB and IMF data and author s calculations (P. Cour-Thimann, Target balances and the crisis in the euro area, mimeo). A positive (negative) sign reflects a net claim (liability) of the national central bank vis-à-vis the ECB in the TARGET2 payment system. Claims and liabilities (including that of the ECB) add up to zero. 6

7 Money market fragmentation Cross-country standard deviation of average unsecured interbank lending rates across euro area countries (EONIA/EURIBOR) (61-day moving average: basis points) (total time line) (zoomed in) Source: EBF and ECB calculations. Notes: All countries means here the following countries: AT, BE, DE, ES, FI, FR, GR, IE, IT, LU, NL, PT, non-distressed countries are in that sample AT, BE, DE, FI, FR, LU, NL. 7

8 Mar 2000 Nov 2000 Jul 2001 Mar 2002 Nov 2002 Jul 2003 Mar 2004 Nov 2004 Jul 2005 Mar 2006 Nov 2006 Jul 2007 Mar 2008 Nov 2008 Jul 2009 Mar 2010 Nov 2010 Jul 2011 Mar 2012 International risk sharing 18 Claims of euro area banks (USD tr.) (total time line) All Regions (LHS) Emerging Europe (RHS) Advanced Economies ex EZ (LHS) EMEs ex EU (RHS) 8

9 Bank CDS Fiscal-banking loop Sovereign and bank CDS spreads: euro area and US (2010 July 2013; basis points) euro area United States Sovereign CDS Source: Bloomberg. Note: Average CDS spread for euro area and US LCBGs and countries where LCBGs are located. Source: ECB. 9

10 Supervisory fragmentation Euro area large and complex banking groups risk weights for corporate and retail credit exposures (percentages; maximum, minimum, interquartile distribution and median) 90 Corporates 40 Retail A+ - A- BBB+ - BBB- BB+ - BB A+ - A- BBB+ - BBB- BB+ - BB- Sources: Individual institutions Pillar 3 reports and ECB calculations. 10

11 Overbanking Total bank assets in the EU, Japan and the US (2012, EUR trillion; percentage of GDP) Funding of non-financial corporations in the euro area and the United States (2002 Q1 2012; cumulated debt shares) GDP Total assets Ratio (rhs) EU USA Japan 350% 315% 280% 245% 210% 175% 140% 105% 70% 35% 0% Source: ECB, FDIC and Bank of Japan. Source: Cour-Thimann and Winkl (2013) 11

12 Problems to be addressed Adverse loop between banks, public finances, macro performance Financial fragmentation Fragmented and ineffective banking supervision, national bias Incoherent bank crisis management, no transparent burden sharing 12

13 Banking Union: elements Banking Union 1. Single Supervisory Mechanism (SSM) 2. Single Resolution Mechanism (SRM) 3. Harmonised 3. Harmonised Deposit Guarantee Deposit Guarantee Schemes Schemes (DGS) (DGS) Common rules (EBA Single Rulebook) Common supervisory practices (SSM Supervisory Manual) 13

14 Institutional scope Significant credit institutions: 1) size: assets >30 bn; ratio assets/gdp exceeds 20% (but >5 bn) 2) importance for the economy of the EU or any MS 3) direct financial assistance from EFSF or ESM 4) 3 largest banks in each country 5) ECB decision Less significant credit institutions ECB supervision, with assistance of national authorities in the preparatory and implementing activities. National supervision with ECB controls 14

15 Functional scope All classic micro-prudential tools: Authorisation of banking activity, mergers and acquisitions Prudential requirements (own funds, large exposure limits, liquidity, leverage and disclosure, internal governance and controls, fit and proper, Supervisory reviews, stress tests, additional prudential requirements Macro-prudential tools: National authorities remain competent for national macro-prudential requirements (e.g. loan-to-value ratio). For instruments in EU law (CR Directive), e.g. countercyclical and SIFI buffers: national authorities have to notify the intended decision to the ECB ECB can apply more stringent macro-prudential measures Remain at national level: supervision over non-banks; antifraud; consumer protection 15

16 Geographical scope Single supervisor automatically includes all euro countries. Right to enter for the outs Non-euro member states can join in close cooperation by: Adopting appropriate legislation and committing to abide to any guidelines or requests by the ECB provide all information on its credit institutions that the ECB may request 16

17 Key institutional features Supervision separate from monetary policy Independence Accountability 17

18 Main preparatory works Mapping of Euro Area Banking System Legal issues relating to Framework Regulation Supervisory Model and Supervisory Manual Supervisory Reporting Issues - reporting template Comprehensive review incl. a balance sheet assessment Organogram and staff (about 800 people to start, plus support) 18

19 Comprehensive Assessment Supervisory Risk Assessment Exercise Supervisory judgements on key risk factors, such as liquidity, leverage and funding Quantitative and qualitative analysis Asset Quality Review Assessment of data quality, asset valuations, classifications of non-performing exposures, collateral valuation and provisions Covering credit and market exposures, following a riskbased, targeted approach Joint ECB/ EBA Stress Test Forward-looking view of banks shock-absorption capacity under stress Conduct in collaboration with the European Banking Authority Source: ECB press release 23 October

20 Asset Quality Review 1 Risk-based 2 Reviews of selected 3 portfolio selection portfolios Quality control, collation, disclosure Bottom-up proposal Conduct of the Asset Quality Review Steps and Description Riskbased portfolio selection Objective NCA proposal of relevant portfolios for each bank, based on existing supervisory data and information from a specific data collection exercise, with pre-defined portfolio classes and minimum coverage criteria. Top-down selection Objective ECB-centralized challenge of proposal and selection on the basis of a specific data collection exercise and data from other sources. Source: ECB press release 23 October 2013 Data Integrity Validation Selected portfolio sampled for review Assessment of the adequacy of banks asset valuation, classification of non-performing exposures, collateral and provisioning Balance sheet adjustments as a result of AQR findings 20 Quality assurance process Portfolio selection Cross-checking through centralized selection and approval Execution Specific national and central quality assurance teams Participation of the ECB and other national competent authorities Strong governance and reporting lines Collation Final quality assurance, bench-marking and review at the central level 20

21 No Evidence of Credit Tightening Change in credit availability to SME (net percentage of respondents) ECB Bank Lending Survey. Data referred to SMEs that had applied for external financing over preceding six months. 21

22 Crisis management framework Why a crisis management framework: Prevents moral hazard Limits systemic risks EU bail in framework (creditor hierarchy) EU Bank resolution authority Orderly bank failures Limits taxpayer exposure EU resolution framework (ex-ante and expost funding, backstop) Depositor protection (national, for now) 22

23 Single Resolution Mechanism Mirrors SSM structure: SRB responsible for resolution of directly supervised and cross-border banks. NRAs responsible for resolution of all other banks. SRB can decide to exercise direct resolution responsibilities at any time. Member States have an opt-in to make SRB responsible for all banks in their territory. Trigger: Both supervisor and resolution authority can assess bank as failing or likely to fail. Voting procedure: shared between SRB, COM and Council. Ultimate decision by Council. Single Resolution Fund. Fully mutualised fund in 10 years. National compartments in transition period. Entry into force: 1 Jan Bail-in as of 1 Jan Backstops. To be developed during transition phase and operational at the latest after 10 years. Transitional arrangements through bridge financing by national sources or from ESM in line with agreed procedures. Inter-Governmental Agreement: To specify channelling of funds to SRF and gradual mutualisation. Ratification of IGA by 1 March

24 Possible improvements Supervisor should be solely responsible to assess failing or likely to fail More rapid and efficient decision-making. At least: weekend-proof urgent procedures Temporary access to joint fiscal backstop (credit line to the SRF) 24 24

25 Opportunities: Conclusions Break bank-fiscal interactions Break national supervisory silos, home biases Reduce fragmentation, improve single market Help stabilise the euro Challenges: Develop a proper crisis management framework Exploit synergy between national authorities (information, experience) and the ECB (level-playing field, European orientation) Transitional issues (avoid early mistakes, reputational loss) 25