Twin Peaks for Europe: State-of-the-Art Financial Supervisory Consolidation

Transcription

1 Twin Peaks for Europe: State-of-the-Art Financial Supervisory Consolidation

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3 Olivia Johanna Erdélyi Twin Peaks for Europe: State-of-the-Art Financial Supervisory Consolidation Rethinking the Group Support Regime Under Solvency II 123

4 Olivia J. Erdélyi Heinrich Heine University Düsseldorf Düsseldorf, Germany Inauguraldissertation zur Erlangung der Doktorwürde der Juristischen Fakultät der Heinrich-Heine-Universität Düsseldorf Erstgutachter: Prof. Dr. Dirk Looschelders Zweitgutachter: Prof. Dr. Christoph J. Börner Jahr der mündlichen Prüfung: 2015 D61 ISBN ISBN (ebook) DOI / Library of Congress Control Number: Springer International Publishing Switzerland 2016 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer International Publishing AG Switzerland

5 Acknowledgments First of all, I am most grateful to my thesis supervisors, Prof. Dr. Dirk Looschelders from the Faculty of Law and Prof. Dr. Christoph J. Börner from the Faculty of Business Administration and Economics of Heinrich Heine University Düsseldorf, for accompanying me on this somewhat unusual interdisciplinary venture at the interface of law and international finance. I also wish to express my gratitude to Prof. Dr. Karel Van Hulle (International Center for Insurance Regulation, KULeuven, formerly European Commission), Dominique Thienpont (European Commission), Prof. Dr. Elemér Terták (European Commission), Ricardo González García (European Commission), Dr. Konrad Szelag (European Commission), Hannes Huhtaniemi (European Commission), Pierre Darbre (European Commission), and Motohiro Hatanaka (Bank for International Settlements) for their extremely helpful expert comments on several topics addressed in this work. Furthermore, I would like to thank my friends Shane Foster, Stephanie Viebe- Foster, and Andreas Krause for proofreading my thesis. Thank you guys for being a great help! And above all, I am deeply grateful to my family, in particular, my husband, Gábor, and my son, Alex, for their love, endless support, patience, and encouragement throughout this project. v

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7 Contents 1 Introduction... 1 References Milestones of European Insurance Regulation Three Generationsof InsuranceDirectives First GenerationInsuranceDirectives SecondGenerationInsuranceDirectives ThirdGenerationInsuranceDirectives SolvencyI The Main Features of SolvencyI Shortcomingsof SolvencyI Need for Modernization SolvencyII Principal Stakeholdersin the SolvencyII Process The Phases of the SolvencyII Process LegalBasis and Structureof the SolvencyII Directive Pillar Pillar Pillar Roof References European Financial Services Legislation Background The Pre-LisbonLamfalussyFramework Level 1: FrameworkPrinciples Level 2: ImplementingMeasures Level 3: UniformImplementation Level 4: Enforcement Review of the LamfalussyProcess vii

8 viii Contents 3.3 Changes Brought by the Lisbon Treaty Co-Decision Procedure Becomes Ordinary LegislativeProcedure ComitologyReform The de LarosièreReform Flaws in the European Financial Supervisory Framework The EuropeanSystem of Financial Supervision The Post-LisbonLamfalussyFramework Level 1: FrameworkLegislativeActs Level 2: Non-LegislativeActs Level 3: UniformImplementation Level 4: Enforcement References Insurance Groups and Their Supervision Characteristics of Insurance Groups Definition OrganizationalForms Group Supervision Under the Insurance Groups Directive GroupSupervisionUnder SolvencyII Pillar 1 Requirements Pillar 2 Requirements Pillar 3 Requirements References The Group Support Regime Background Introduction of the Rules The Group Support Regime s Operation in Practice Scenario 1: Breach of One Solo SCR Scenario 2: Breach of One Solo MCR Scenario 3: Breach of Consolidated Group SCR Scenario 4: Breach of Minimum Consolidated GroupSCR Compromise Instead of Group Support Regime The Way Forward References Towards a Genuine Economic and Monetary Union The Case for a Full Economic and Monetary Union About Successful Monetary Unions The Flaws of the Maastricht Architecture Genuine Economic and Monetary Union IntegratedFinancial Framework:BankingUnion Integrated Budgetary Framework: Fiscal Union

9 Contents ix Integrated Economic Policy Framework: Economic Union Democratic Legitimacy and Accountability: Political Union References Reform of the EU Financial Stability Framework Financial Stability Frameworks Across the Globe The Rationale for FinancialRegulation The FourFinancial SupervisoryApproaches The Role of Central Banks in Financial Stability Frameworks How Much Does SupervisoryStructureReally Matter? Integral Features of Successful Financial Stability Frameworks The Current European Financial Stability Framework Twin Peaks for Europe? Reform Objectives, Policy Options, and Methodology Analysis andcomparisonof PolicyOptions Concluding Remarks on the Overall Design of the New Financial Stability Framework References Conclusion

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11 Abbreviations AAE ACME AISAM AMICE BCBS BEPGs BOE BRRD BTS CBA CBI CCI CEA CEBS CEIOPS CESR CFO Forum CJEU CRM DGS DNB EBA EBC EC ECB ECBR ECOFIN EDIS Actuarial Association of Europe Association des Assureurs Coopératifs et Mutualistes Européens Association Internationale des Sociétés d Assurance Mutuelle Association of Mutual Insurers and Insurance Cooperatives in Europe Basel Committee of Banking Supervision Broad Economic Policy Guidelines Bank of England Bank Recovery and Resolution Directive Binding Technical Standard cost-benefit analysis central bank independence Convergence and Competitiveness Instrument Comité Européen des Assurances Committee of European Banking Supervisors Committee of European Insurance and Occupational Pensions Supervisors Committee of European Securities Regulators European Insurance CFO Forum Court of Justice of the European Union Provisions on the Supervision of Group Solvency for Groups with Centralized Risk Management deposit guarantee scheme De Nederlandsche Bank European Banking Authority European Banking Committee European Community European Central Bank European Conduct-Of-Business Regulator Economic and Financial Affairs Council European Deposit Insurance Scheme xi

12 xii EDP EEA EEC EFC EFSC EFSF EFSM EIOPA EIOPC EIPA EMU EP ESA ESC ESCB ESFS ESM ESMA ESRB FCD FSA FSAP FSCS FSF GA GEMU IAA IAIS IASB ICS ICSD IFRS IGA IGD IGS IIA IIA IIMG IOSCO ITS JC LLR LTROs MCR MiFID Abbreviations excessive deficit procedure European Economic Area European Economic Community Economic and Financial Committee European Financial Stability Committee European Financial Stability Facility European Financial Stabilisation Mechanism European Insurance and Occupational Pensions Authority European Insurance and Occupational Pensions Committee European Institute of Public Administration Economic and Monetary Union European Parliament European Supervisory Authority European Securities Committee European System of Central Banks European System of Financial Supervision European Stability Mechanism European Securities and Markets Authority European Systemic Risk Board Financial Conglomerates Directive Financial Services Authority Financial Services Action Plan Financial Services Compensation Scheme Financial Stability Forum Geneva Association Genuine Economic and Monetary Union International Actuarial Association International Association of Insurance Supervisors International Accounting Standards Board investor compensation scheme Investor Compensation Schemes Directive International Financial Reporting Standards intergovernmental agreement Insurance Groups Directive insurance guarantee scheme Institute of Internal Auditors Inter-Institutional Agreement Inter-Institutional Monitoring Group International Organization of Securities Commissions Implementing Technical Standard Joint Committee of the European Supervisory Authorities lender of last resort Long-Term Refinancing Operations Minimum Capital Requirement Markets in Financial Instruments Directive

13 Abbreviations MIP MMLR MOU MtM NBER NCA OMTs ORSA PRA RTS SCR SFCR SGP SMP SPV SRB SRF SRM SRP SSM TEC TEU TFEU TINA TSCG VaR xiii Macroeconomic Imbalances Procedure market maker of last resort memorandum of understanding Micro to Macro Approach National Bureau of Economic Research National Competent Authority Outright Monetary Transactions Own Risk and Solvency Assessment Prudential Regulation Authority Regulatory Technical Standard Solvency Capital Requirement Solvency and Financial Condition Report Stability and Growth Pact Securities Market Programme special purpose vehicle Single Resolution Board Single Resolution Fund Single Resolution Mechanism Supervisory Review Process Single Supervisory Mechanism Treaty establishing the European Community Treaty on European Union Treaty on the Functioning of the European Union there is no alternative Treaty on Stability, Coordination and Governance in Economic and Monetary Union value at risk

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15 List of Figures Fig. 2.1 The structureof SolvencyII Fig. 3.1 Level1 of the pre-lisbonlamfalussyframework Fig. 3.2 Level2 of the pre-lisbonlamfalussyframework Fig. 3.3 The pre-lisbonlamfalussyframework Fig. 3.4 The Europeansystem of financial supervision Fig. 3.5 The post-lisbonlamfalussyframework Fig. 3.6 Level2 of the post-lisbonlamfalussyframework Fig. 5.1 Notionalinsurancegroup Fig. 5.2 Breach of one solo SCR without GSR Fig. 5.3 Breach of one solo SCR with GSR Fig. 5.4 Breach of one solo MCR without GSR Fig. 5.5 Breach of one solo MCR with GSR Fig. 5.6 Breach of consolidated group SCR without GSR Fig. 5.7 Breach of consolidated group SCR with GSR Fig. 5.8 Breach of minimum consolidated group SCR without GSR Fig. 5.9 Breach of minimum consolidated group SCR with GSR Fig. 7.1 The current EU financial stability framework Fig. 7.2 Hybrid twin peaks EU financial stability framework xv

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17 List of Tables Table 7.1 Table 7.2 Table 7.3 Objective 1: establishment of a European insurance and securities supervisor Objective 2: establishment of a European insurance and securities resolution authority Objective 3: establishment of a European safety net in the insurance and securities sectors xvii