Brussels, 03/11/2015 (Agence Europe) - The 'supervision' plank of banking union in the eurozone, which has been in place since early November 2014, is responsible for creating a European banking supervision culture, but continues to come up against the problem of insufficient regulatory harmonisation.
“In my current function, I experience daily how European law has been transposed into national law and how the respective national supervisors have applied the national and European rules in practice. The differences are indeed greater than I would have expected”, said Sabine Lautenschläger, vice-president of the Single Supervisory Board, in an interview published in late October by the German daily newspaper Handelsblatt. She referred by way of example to the 'fit & proper' directive, which requires the supervisor to test the capabilities of new directors of a credit establishment. “For these tests alone, there are 19 extremely different sets of legal requirements”, she pointed out - as many rules as there are countries in the eurozone.
Speaking before the European Parliament in mid-October, the president of the Single Supervisory Board, Danièle Nouy, also flagged up the great many different options available to the member states for banking prudential regulations. “This makes life much harder for us as supervisors and stands in the way of major investment decisions that the market and the banks need to make”, she said, expressing her hopes that the European legislator would deal with this issue as a matter of urgency (see EUROPE 11413).
The recent 'CRD' legislative package, which increases the quantity and quality of capital, will be fully implemented in 2019. Including a regulation applicable in exactly the same way throughout the EU, it is expected to help to normalise taking account of risks, wherever a bank is located.
The teams of supervisors, each headed up by an expert of a different nationality from the bank being supervised, are constantly honing their methodology, which reaches all areas of supervision: capital requirements, risk management and liquidity management, IT security, bonuses to directors, etc. Given the scale of the task at hand, these teams will be strengthened in 2016, when they are joined by 160 new colleagues.
Since 4 November 2014, the ECB has directly supervised 123 systemic banks: 21 in Germany, 15 in Spain, 14 in Italy, 10 in France, 8 in Austria, 7 in Belgium and the Netherlands, 5 in Luxembourg, 4 in Ireland, Greece, Cyprus and Portugal, 3 in Latvia, Lithuania, Malta, Slovenia, Slovakia and Finland, and 2 in Estonia. These banks, which represent around 85% of the total bank assets of the eurozone, fill one of the following criteria: - at least €30 billion in total bank assets; - significant cross-border assets; - at least three establishments per country (see EUROPE 11190). First of all, they were subjected to a detailed health check, which will be repeated in 2016 with the involvement of the European Banking Authority (EBA), which has been tasked with carrying out new “stress tests”.
In the 2014 health check, the ECB and the EBA found that the four Greek banks covered by the single banking supervisory mechanism had limited capital requirements. Since then, the chaotic end to the second Greek bailout plan and the protracted negotiations for the third, which culminated with restrictions on movement of capital for the Greece, worsened the health of the Greek banks. On Monday, the ECB identified an own-funds deficit of €14.4 billion, €4.9 billion for Piraeus Bank, €4.6 billion for NBG, €2.7 billion for Alpha Bank and €2.1 billion for Eurobank (see other article).
Banking union incomplete. As a result of the sovereign debt crisis in the eurozone, banking union was set in train in order to break the links between bank failures and public debt. At this stage, it consists of transferring banking supervision and resolution responsibilities to the European level.
The Single Resolution Board will therefore be up and running from January 2016. This new European authority will be responsible for applying, in the eurozone, the 'BRRD' directive, which harmonises the national restructuring and bank restructuring schemes and for mobilising the Single Resolution Fund (SRF), the financial arm of banking union (see EUROPE 11420 and 11061). The regulatory process instituting the SRF fund is not entirely complete, as the member states have still to reach an agreement on how to provide it with capacity of €55 billion from its first day in operation, in January of next year, and through its build-up phase (2016-2023) (see EUROPE 11402).
Despite Germany's consistent opposition, the European Commission recently confirmed that before the end of this year, it is to present a proposal to set up a European insurance scheme for the national deposit guarantee schemes, the third pillar of banking union (see EUROPE 11415). (Original version in French by Mathieu Bion)