Legal Perspectives on Macroprudential Regulation

Transcription

1 ESRB Annual Conference 21/22 September 2017 European Central Bank Frankfurt am Main Legal Perspectives on Macroprudential Regulation Professor Dr Kern Alexander

2 Main points Macro prudential policy the contours Legal dimension Institutional design Strong-form of Independence v Accountability ECB s limitations as a macro-prudential supervisor 2

3 Fixing international financial regulation: A cure for crises requires a comprehensive and consistent framework Macroprudential policy Resolution Monetary Policy Fiscal Policy Regulation/ Supervision

4 Macroprudential policy Introduce macro-prudential policy Create counter-cyclical buffer in banks Direct derivatives transactions to central counterparties or clearing houses? Develop other macro-prudential tools? Limits on loan to value ratios and loan to income ratios? Leverage limits/sifis Introduce systemic risk boards In US In UK In EU? Tasks: systemic risk boards identify and mitigate systemic risks in a timely fashion, including those risks that emanate from policymakers themselves?

5 Legal dimension of supervisory authority Competences Powers Responsibilities Tasks As an illustration, Article 4 SSMR (exclusive competence) ECB exclusively competent to carry out, for prudential supervisory purposes, [a number of specific] tasks in relation to all credit institutions established in the participating Member States. Supervisory competence depends on the identification by the Council of its tasks (ie., assignments). licensing, monitoring and enforcing prudential regulations, Art. 4(1)(k): ex-ante supervision No actual resolution and crisis management powers

6 Discharge of legal powers in macro/micro supervision Six main principles o o o o o Tasks carried out effectively by supervisor, without reputational risks Independence of supervisor to take proportional and necessary measures to regulate/restructure property rights. Principle 2 Core Principles for Effective Banking Supervision (September 2012) Strict separation between monetary policy & supervisory tasks Harmonisation and consistency to promote level playing field Accountability of supervisor - liability, as per Core Principle 2(9)): should remain limited to reporting obligations and preserve the supervisor s independence Kern Alexander Seite 6

7 Independence v accountabiliy in macroprudential supervision: Implications of Independence for Monetary Policy Usual model for monetary authorities: independence from political pressures, clear mandate for price stability Strengthen credibility of central banks increases success of monetary policy Independence however also means less democratic legitimacy and control SSM Art. 16(1): When carrying out the tasks conferred upon it by this Regulation, the ECB shall act independently. Application of independence model for microprudential (or even macroprudential) regulation? Alexander Seite 7

8 The ECB functioning of the SSM supervisory tasks Task explicitly included in SSM Regulation (Art. 4 4(1)) ECB Regulations, guidelines, general instructions When necessary ; upon request, or on its own after consulting NCA Task based on MS national supervisory law NCA Authorisation + holdings acquisition / disposal Remaining SSM tasks. Significant credit institutions (or within top 3 in MS) Alexander Not significant Not a credit institution under EU Law Seite 8

9 Macroprudential Supervision and the ECB Twofold involvement of ECB in macroprudential tasks > Role as Secretariat of the ESRB > Macroprudential tools under Art 5 SSMR Risk of accumulation of EU and ECB responsibilites/liabilities ESRB has no legal powers - only warning and recommendations. Effectiveness as a Macroprudential Supervisor? Alexander Seite 9

10 Monetary policy and supervisory decisionmaking separation? Monetary policy and supervisory mandates are concentrated on ECB (accumulation of functions/liabilities) Creation of Single Supervisory Board intended to ensure separation. Separate staffs and assessments But cannot modify decision-making processes of ECB under which Governing Council must be ultimate decision-maker (Art 12.1 ESCB Statute) Supervisory Board & Administrative Board of Review can carry out preparatory tasks and make recommendations but Governing Council must be ultimate decision-maker. Alexander Seite 10

11 SSM and SRM coordination via Resolution/bail-in intervention Resolution authority evaluates options Execute Bail-in Recovery Sale Deposit transfer/ Bridge bank Subsequent month

12 Additional issues: Sustainable (Green) Banking Environmental Sustainability Challenges Social risks: Increasing inequality, human rights Resilience to environmental phenomenon/natural disasters; impact on certain industries, can spread to the financial system and to rest of the economy; redirecting credit/capital to sustainable sectors Goal: transition to a low-carbon and sustainable economy How to manage the transition? 12

13 Prof. Dr. Kern Alexander