The role of national supervision in the new supervisory regime Nordic capital markets forum Jyri Helenius, Finanssivalvonta

Transcription

1 The role of national supervision in the new supervisory regime Nordic capital markets forum , Finanssivalvonta Finanssivalvonta Finansinspektionen Financial Supervisory Authority

2 Why single banking supervision? The financial crisis highlighted the need to harmonise supervision across countries. Bank problems can easily spill over from one country to another. National supervision proved insufficient for multinational banks. The costs of financial crises may be unsustainable for an individual country. Risks threatening stability need to be addressed proactively. 1

3 European System of Financial Supervision Micro-prudential supervision EU s framework for supervision Macro-prudential supervision European Systemic Risk Risk Board Board (ESRB) (ESRB) E S As European Securities and Markets Authority (ESMA) European Banking Authority (EBA) European Insurance and Occupational Pensions Authority (EIOPA) Joint Committee European Central Bank (ECB) National central banks European Supervisory Authorities (ESAs) European Commission National supervisors (no voting rights) Chairman of the Economic and Financial Committee (no voting right) National supervisors National designated authorities Single Supervisory Mechanism (SSM) Supervision of banks in the euro area ECB authorised to perform macro-prudential supervision 2

4 Responsibilities conferred on the SSM and different authorities Governing Council of the ECB Adoption of decisions Single Supervisory Mechanism (SSM) Supervisory Board ECB Banking supervisors of euro area countries Banking supervisors of non-euro area SSM countries Supervisory principles and decisions The ECB s banking supervision organisation National supervisory authorities: cooperation within the SSM Participation in the supervision of significant banks Main responsibility for supervision of banks other than significant banks Joint Supervisory Teams The ECB s banking supervision organisation Banking supervisors from SSM countries Day-to-day supervision of significant banks Preparation of decisions Other remaining tasks of national supervisory authorities within their own remit Supervision of the insurance sector Supervision of markets and conduct of business, in respect of all banks 3

5 Supervisory Board Supervisory principles and plans Processing of decisions concerning banks Chair and Vice-Chair (from the ECB) Composition Representatives of national supervisors, now 19 persons Where the central bank is not the supervisor, its representative may participate in Supervisory Board meetings (without voting rights) In addition, 4 representatives from the ECB The principle of each member having one vote applies in supervisory issues. The Supervisory Board establishes a Steering Committee from among its members. 4

6 Organisation of supervision at the ECB Governing Council of the ECB Adoption of decisions Supervisory Board Danièle Nouy, Chair DG Micro Prudential Supervision I Stefan Walter Significant banks (about 30) DG Micro Prudential Supervision II Ramôn Quintana Significant banks (about 90) DG Micro Prudential Supervision III Jukka Vesala Banks subject to indirect supervision (about 3,400) DG Micro Prudential Supervision IV Korbinian Ibel Joint supervisory tasks in respect of all banks Secretariat Division Pedro Gustavo Teixeira Supporting the Supervisory Board s work 5

7 Joint operational guidelines and supervisory practices SSM Framework Regulation SSM Supervisory Manual ECB rules for application of SSM Regulation Supervisory process, methodology and procedures Specifies key SSM provisions, incl.: Assessment of banks significance Cooperation between national supervisors and the ECB Language-related provisions Macroprudential supervision Reporting and notification obligations Sanctions Joint Supervisory Teams Ongoing risk monitoring and assessment On-site inspections Preparation of decisions concerning banks Joint risk assessment (Risk Assessment System, RAS) and Supervisory Review and Evaluation Process (SREP) 6

8 ECB s powers concerning all banks Authorisation and withdrawall of authorisation Issuing regulations and guidelines to the national authorities Deciding to exercise directly all supervisory powers for one or more credit institutions Exercising oversight over the functioning of the SSM Requesting information from national authorities and credit institutions Sanctions 7

9 On-going supervision of Significant Institutions (SI) by Joint Supervisory Teams (JST) JSTs comprise supervisory staff from the ECB and the NCAs, representing the entire required set of expert skills About 75 % of the resources from the NCAs JSTs will be established and coordinated by the ECB Functional reporting line to the ECB JST staff members from NCAs remain NCA staff JST composition follows the principle of proportionality Main tasks of JSTs: Annual planning Off-site analysis (risks, capital, liquidity) Preparing capital adequacy and liquidity decisions Contact point for banks 8

10 On-site inspections of Significant Institutions lead by ECB Inspection plans prepared in co-operation between the ECB and national authorities Decisions by the Supervisory Board Ad-hoc inspections also possible ECB nominates heads of on-site inspections May be representatives of other national authorities ECB has an option to nominate its own staff as head of mission Members of inspection team from national authorities and ECB Also from national authorities of other countries 9

11 Less Significant Institutions (LSI) under direct supervision of national authorities National authorities are responsible for supervision of LSIs Guidelines and methodology from ECB also for LSI supervision Reporting to ECB Notification of significant supervisory decisions to ECB ECBs role in LSI supervision Issues supervisory guidelines and methodology for national authorities Follows LSI sector and LSI supervision based on reporting from national authorities May take any LSI to its direct supervision 10

12 Management of banks crisis situations in banking union ECB Requirement for drawing up recovery plans and assessment thereof (large banks) Supervisory measures at an early stage (large banks) Joint SSM guidance for crisis situations Cooperation with the Single Resolution Board National supervisors Participate via ECB cooperation in large banks preparations for crisis situations and in formulating related measures Requirement for drawing up recovery plans and assessment thereof (small banks) Supervisory measures at an early stage (small banks) Cooperation with the national resolution authority Resolution authorities Resolution funds Single Resolution Board: resolution of large banks National resolution authorities: resolution of small banks Single Resolution Fund: covering resolution costs by contributions from banks 11

13 Best of both worlds Centralized Prevents supervisory capture Level playing field Cross-border effects covered Improves quality of supervision (best practices) Improves effectiveness and efficiency National Knowledge of local markets Knowledge of national legislation Knowledge of local culture Knowledge of the supervised entitites Local networks 12

14 How has SSM changed FIN-FSA s work? More intrusive supervisory approach FIN-FSA processes and methodology replaced by SSM processes and methodology Supervisory decisions of Finnish SI-banks made by the Supervisory Board Totally new tasks Supervisory Board membership => Decisions about 120 biggest banks in Europe Reporting to ECB Notification of significant decissions concerning LSI-banks More documentation needed For example concerning applications from supervised entities Involvement in ECB working groups => So far more work, synergies in longer run 13

15 What have been the benefits of the SSM so far? SSM has brought more structure to banking supervision SSM has brought to surface differences in the supervisory practices and banking regulation between eurozone countries SSM has already started to harmonise suprevisory practices SSM has reduced risk of supervisory capture SSM has contributed to levelling the playing field between eurozone banks Competitive advance for well capitalized, well lead banks with high quality corporate governance...however SSM has been around for less than a year... 14

16 Thank you! jyri.helenius(at)finanssivalvonta.fi 15