CNB Key Priorities in Financial Supervision

Transcription

1 CNB Key Priorities in Financial Supervision Vladimír Tomšík Vicegovernor, Czech National Bank Czech Banking Association Conference October 22,

2 Factors determining CNB's priorities in the area of financial supervision Long-term structural and institutional factors: Structure of financial system of the Czech Republic: Dominant role of foreign ownership in the Czech banking sector (Czech legal entities operating under Czech business law) Position of the CNB as predominantly host supervisor within the EU institutional, regulatory and supervisory framework 2

3 Factors determining CNB's priorities in the area of financial supervision (cont.) Medium and short-term economic and institutional factor: Micro-prudential analysis: - risks profile, - capital adequacy, - quality of loan portfolios, - provisioning, etc. State of play of European agenda ( regulatory bullet ) 3

4 Key priorities of the CNB in the financial supervision Nowadays CNB's priorities rest on following areas: Banking micro-prudential supervision Prudential regulation New agenda : Safeguarding CNB position in the EU institutional framework of financial supervision Macro-prudential supervision 4

5 Key priorities (1) Banking supervision The priority is to perform the effective banking supervision with particular focus on: (1) Capital adequacy on both levels: consolidated basis solo basis (2) Credit risk key aspects of risk exposure, risk management and risk mitigation prudential categorization of claims sufficient provisioning correct collateral valuation 5

6 Key priorities (1) Banking supervision (cont.) (3) Liquidity and links to parent banks - In response to drying up of liquidity in the euro zone interbank market the CNB introduced the extraordinary weekly reporting about bank's exposures to foreign parent/sister banks. Reported are: volume and structure of liquid assets; expected transaction that could cause significant decrease of volume of liquid assets 6

7 Key priorities (2) Prudential regulation Participation in EU wide introduction of more rigorous micro-prudential regulation based on Basel III (CRD/CRR IV) which the CNB supports. Bank capital: CNB supports better regulation, not over-regulation. Banking regulation is based on capital and therefore CNB supports measures to improve quality of bank capital by: establishing requirements for minimum core Tier 1 and total Tier 1 including capital conservation buffer + systematically important capital buffer harmonizing items deducted from capital and their application in setting core Tier 1 or total Tier 1 abolishing Tier 3 capital 7

8 Key priorities (2) Prudential regulation (cont.) Liquidity: CNB agrees in principle with BCBS s proposals on liquidity indicators Provisions: Regulatory rules for provisions against expected losses should be aligned with accountancy rules Procyclicality: Procyclicality of capital requirements can be treated within Pillar 2 using supervisory tools available under current regulations Leverage ratio: A suitable additional indicator whose treating under Pillar 2 is probably more appropriate than under Pillar 1 because leverage ratio can become undue competitor to capital adequacy based on risk weighted assets. 8

9 Key priorities (3) Safeguarding CNB's position in the EU institutional framework of financial supervision The main goal consist in safeguarding the adequate balance between CNB's supervisory powers and its responsibility for stability of Czech financial system. The balance between supervisory powers of home supervisor of parent bank and the CNB as the host supervisor of subsidiaries of parent banks. This balance for the CNB is of crucial importance when a conflict of interest between home and host supervisor can arises. Such a conflict can arise for example from the issue of: the asymmetry of information between home and host supervisor, financial situation and performance of home/host banks, safeguarding the principle of conducting intra-group transaction on arms length basis, regulatory limits for intra-group exposures etc. 9

10 Key priorities (4) Macro-prudential supervision The priority consist in: Regular analysis of stability of the Czech financial system as a whole (yearly Report on Financial Stability) Development and updating of toolkit of these analysis Regular stress testing focused on the stability of the Czech banking sector 10

11 Banking Union The priority consists in ensuring that: Czech financial stability will not worsen Czech position within the single market in financial services will not worsen (level playing field, equal treatment) major risks identified will be minimized all pillars of the BU have to be created, discussed and approved as an integral whole (i.e. single supervision, common resolution framework, shared EDGS funds and a single rule book) voting modalities in EBA will be designed to be consistent and non-conflicting in the long term (respect equal treatment) 11

12 Thank you for your attention. 12