EBA s role in promoting supervisory and regulatory convergence in the EU. Andrea Enria - EBA Chairman Helsinki 5 June rd FIN-FSA Conference

Transcription

1 EBA s role in promoting supervisory and regulatory convergence in the EU Andrea Enria - EBA Chairman Helsinki 5 June rd FIN-FSA Conference

2 Outline Progress in the repair of the EU banking sector The stress test 2014: shaping the role of the EBA in the new set-up EBA rule-making work: building the Single Rulebook Reporting and transparency Special focus on recovery and resolution issues The EBA work on supervisory convergence Challenges to supervisory convergence The road to supervisory convergence New European SREP Colleges of supervisors, after the Banking Union Increasing transparency EBA s role in promoting supervisory and regulatory convergence in the EU 2

3 The path to restore trust in the EU banking sector Bold policy responses at EU level EBA actions EU-wide stress test 2011 EU-wide recapitalisation AQRs EU-wide stress test 2014 Pre-emptive capital raising Credit sensitivities Disclosure (capital and sovereign) 9% after sovereign buffer EUR 204bn capital strengthening CT1 ratio of 11% comparable to US EU CT1 sufficient if RWA can be trusted EBA recommendation Common definition of NPL and forbearance CAs responsibility PIT assessment of capital, with minimum threshold Forward looking assessment and reaction function Significant frontloading RWA consistency Ongoing, leading to supervisory consistency, transparency and benchmarking 3

4 Capital strengthening: from the EBA recap exercise to frontloading ahead of stress test Tier 1 capital ratio weighted average (source: Risk Dashboard) EU banks' capital positions maintained upward trend. T1 capital ratio weighted average peaked at 13.1% (up 2 p.p. since Dec-2011). Evolution of Tier 1 capital ratio components (December 2009=100), Source: Risk Dashboard Cumulative CoCo issuance, EUR bn Core Tier 1 ratio after the EBA s 2011 Recommendation reached 11.7% (from 10% in Dec-2011). Capital offerings continued in Q and first months of 2014, both common equity and hybrids. Capital raised including proceeds from initial public offerings and divestments is EUR35bn CET1 since July 2013; CoCos issuance around EUR 13bn (Q12014). 4

5 Capital strengthening at EU and US banks EU banks capital positions are on a comparable basis to those of US banks. The largest 20 banks in the US and in the EU had approximately the same absolute amount of Tier 1 capital at the end of 2008, and the EU banks have increased capital more than their transatlantic competitors. US banks have issued more fresh equity and retained earnings to a larger extent, but also conducted significantly more buy-backs. 5

6 De-risking, deleveraging and cleaning of balance sheets Total assets and Risk-weighted assets EUR tn, and specific allowances for loans (source: Risk Dashboard) European banks have accomplished significant adjustments on the asset side by cutting risky assets (de-risking); shrinking their balance sheets (deleveraging); cleaning balance-sheets (loan sales and increasing provisining). The adjustment accelerated towards the end of 2013 (cut-off date for the AQR and the stress test). Banks have been frontloading impairments: additional provisioning of EUR 25bn between Jun2013 and Dec2013. Also the recent increase in NPLs might to some extent reflect the new EBA definitions, contributing to a more reliable picture. EU banks expected to sell a record of EUR 80bn non-core loans in 2014, as compared to EUR 64bn in Positive developments, but no room for complacency. The AQR has to assess the reliability of balance sheets and banks may end up needing additional capital. Banks and supervisors need to be prepared and ready to take actions as a result of these exercises. 6

7 Roles and cooperation in the European stress testing universe European Banking Authority Common methodology, templates Data hub for final dissemination Benchmarking tools for competent supervisors 124 banks ECB and 28 National Competent Authorities Responsibility for quality assurance Assessment of banks assumptions, data, estimates and results Definition and communication of any additional sensitivities Supervisory reaction function European Systemic Risk Board, European Commission Common scenario (in cooperation with ECB, NCAs) 7

8 EBA work on rule-making Total number of TS approved by BoS and submitted to COM in 2013 Total number of TS approved by BoS and submitted to COM in 2014* RTS ITS RTS ITS Total number of TS adopted by COM and published in OJ (2013) Total number of TS adopted by COM and published in OJ (until 1 June 2014) RTS ITS RTS ITS N/A * until 1 June

9 EBA work on rule-making Regulatory technical standards to be finalised by end 2014 BRRD CRD IV 6 32 Regulatory technical standards to be finalised by end 2015 BRRD CRD IV

10 An achievement: European supervisory reporting Comprehensive coverage ofsupervisory data Compliance COREP, Large Exposures Risk monitoring COREP, Large Exposures, Asset encumbrance, Liquidity and Leverage ratio, NPL & forbearance Financial position FINREP Calibration of regulatory ratios Liquidity and Leverage ratio Integrated, fully harmonised reporting framework Direct application no further implementing regulation on national level Replaces reporting on national level (areas covered by the ITS) Use of common structure/conventions/concepts/definitions Technical solutions of Data Point Model and XBRL-taxonomies Teething problems, difficult first time application, but major achievement PRESENTATION TITLE 10

11 A challenge: the Single Rulebook on recovery and resolution Standards on recovery and resolutions plans (RRPs): recovery plans as an additional element within the overall risk management framework, standards on resolution plans defining the preconditions for choosing between MPE and SPE impact on Business as Usual Guidelines on possibility to impose structural measures to overcome obstacles to resolvability (link with Barnier/Liikanen proposals for structural measures) Guidelines on triggers for early intervention and resolution: need to ensure a continuum between SREP and failing or likely to fail Rules on functioning of bail-in and definition of criteria to set up the MREL/GLAC: need to cast national discretion within a European framework Standards on valuation criteria to trigger resolution, to be used within resolution to measure recap needs, and after resolution (to assess NCWO) Risk-weighted contributions to Deposit Guarantee Schemes and Resolution Funds: how to measure PD and the Funds LGD Standard on functioning of resolution colleges, for joint decisions

12 An overarching issue: national discretions and deviations from international standards Impressive progress on the Single Rulebook with CRR and EBA standards, but the peculiarities of Council negotiations on legislative texts imply that: we still have far too many national discretions, plus a massive room for structural and macroprudential measures at the national level the SSM and the ESRB could go a long way to ensure common European approaches the EU framework has departed from international standards in a number of areas the EBA will have to use its advisory role to ensure that EU rules are fully in line with the Basel standards PRESENTATION TITLE 12

13 Challenges to supervisory convergence Key limitations for consistency in Joint decisions on capital Absence of common methodology for the SREP in Pillar 2 Inconsistency in articulation of JDs (reflecting national methodologies) Challenges for mutual understanding of outcomes, in some cases No common SREP process Wide variation in approaches Difficulties in mediation Guidelines on SREP methodology Greater consistency needed ITS on Joint decisions on institution specific prudential requirements PRESENTATION TITLE 13

14 The road to convergence of supervisory practices CRD mandates EBA to addresses SREP from three angles: 1. development of the Technical standard for joint decisions 2. development of Guidelines for common procedures and methodology for SREP 3. monitoring and assessment of consistency of SREP methodologies and reporting to EU institutions SREP Guidelines ITS on joint decisions Monitoring of convergence EBA work on common European SREP framework 14

15 The road to convergence in supervisory practices (2) ITS on Joint decisions for capital and liquidity Finalised in December 2013 covers process and templates for joint risk assessment and joint decisions on capital and liquidity Supported by non-binding template for joint decision document SREP Guideline Planned for public consultation in 2014 EBA primary objective in SREP GLs: Increase the consistency and quality of supervisory SREP practices, and hence of their outcomes EBA work on common European SREP framework 15

16 New European SREP - Four major building blocks Proportionality Categorisation of institutions Minimum supervisory engagement per category BMA Internal Governance Common scoring Risks to capital and capital adequacy Risks to liquidity and liquidity resources Risk scores Viability scores Guidance on supervisory measures CRD measures CRD BRRD link Early intervention Sharing of experience from EU perspective 16

17 Colleges of supervisors in 2014 Important changes for home host coordination and colleges in 2014: Transition to SSM as both consolidating and host supervisor New tasks for colleges from CRD, BRRD, EBA Recommendation - outlined in EBA Action Plan for Colleges 2014: College meetings, supervisory action plans, well established Joint Risk Assessment and Joint decision on capital well established Joint decision on liquidity new for 2014 Assessment of Recovery Plans new for 2014 Capital Preservation Recommendation new for 2014 EBA Recommendation on AQRs new for 2014 Colleges will continue to play an important role for banks with presence in both SSM and non- SSM countries. Cross-border aspects in supervisory cooperation will remain to be significant. EBA work on promoting colleges 17

18 Colleges after introduction of the SSM Consolidating non- SSM supervisor Consolidating SSM supervisor Non-SSM & relevant third countries (7%) Non-SSM & relevant SSM (18%) SSM & relevant third countries (12%) SSM & relevant non-ssm (49%) Main focus of EBA Non-SSM only (2%) SSM only (12%) PRESENTATION TITLE 18

19 Increasing transparency Dissemination of aggregated data and analysis will benefit wider public Comparable data a pre-condition for disclosing EU-wide data EBA work on transparency Guidelines and technical standards on disclosure, benchmarking Pillar 3 disclosures, identification of best practices Disclosure of the EBA Risk Dashboard with underlying data Disclosure of Stress Test and Recapitalisation exercise results with detailed exposures data Disclosure of credit risk parameters by countries and by portfolios Sharing individual comparable data and risk indicators between supervisors Nordic authorities pioneering in sharing Key Risk Indicators of Nordic banks PRESENTATION TITLE 19

20 EUROPEAN BANKING AUTHORITY Tower 42, 25 Old Broad Street London EC2N 1HQ Tel: Fax: /2