Brussels, 22/03/2016 (Agence Europe) - The Single Supervisory Board within the ECB, which is responsible for directly supervising 129 large banks within the Banking Union in the eurozone, will focus its activities in 2016 on the following risks, in order of importance: risks related to profitability and the economic model, non-performing loans, own fund adequacy, governance and liquidity.
The “considerable” volume of problematic loans inherited from the past is a “challenge” to the banks directly under the supervision of the European Central Bank, the President of the Board, Danièle Nouy, commented on Tuesday 22 March, during an exchange of views with the committee on economic and monetary affairs of the European Parliament, which was cut short by the terrorist attacks on Brussels (see other article). “Non-performing loans weigh down profitability and capital, slowing banks' capacity to provide new loans to consumers”, she added. She stressed that banks had made “substantial progress” in tackling this problem, for instance by increasing the “funding levels”. In addition to the legal and structural reforms which certain member states have undertaken (such as Italy: Ed), Nouy said that in 2015, the ECB had worked “intensively” with the banks to allow them to develop “tailor-made and detailed action plans”. We have to see whether specialist investors can take on these assets with the possibility of restructuring certain loans, she said. On the other hand, she dismissed the suggestion by Bernd Lücke (ECR, Germany) that a mechanism could be set in place at European level for the depreciation of these assets. “Do we need a massive depreciation? I'm sceptical about that, because I don't think a single tool can respond to a number of different situations”, she said.
In 2015, the Single Supervision Mechanism carried out 240 on-site inspections, 95% of which were led by the national authorities in banks still under their direct supervision. It carried out an exhaustive assessment of the assets of nine financial institutions newly supervised at European level, a health check which brought to light an own-fund deficit of €1.4 billion in Portugal's Novo Banco (see EUROPE 11431).
Nouy repeated her calls for increased harmonisation of the banking prudential rules in order to limit the options and leeway granted to the national banking systems. These national options and leeway constitute “a key element in the divergences of the supervision rules”, she said. She argued that if these provisions are not harmonised, “it becomes impossible to supervise banks within the Banking Union and the single market consistently”. For this reason, the ECB started work last week on a harmonisation exercise for the 122 options and leeways not requiring a legislative initiative, by means of the adoption of an internal regulation and an operational guide. In 2016, the European supervisor will act to harmonise a further seven options and leeways.
EDIS. When asked about this by Jakob von Weizsäcker (S&D, Germany), the former head of the Banque de France welcome the legislative proposal bringing in a European deposit insurance scheme (EDIS) (see EUROPE 11448). “It was the missing pillar” of Banking Union, she said, explaining that the banks should contribute to the European deposit insurance system on the basis of the risks run. She said that the “European work on reducing and sharing financial risks would feed into each other”, calling for a clear roadmap and timetable for this work. As regards the reduction of financial risks, Nouy supports limiting banks' exposure to the sovereign risks. She agreed with Marco Valli (EFDD, Italy) that any action should be “gradual”, as the situation varies between member states. The Basel Committee is looking at the question but ultimately, I will use the tools you give me, she told the MEPs.
BSR. Fabio De Masi (GUE/NGL, Germany) questioned Nouy about the banking structural reform currently at stalemate in the European Parliament. She stressed the importance for banks of maintaining their “market-making” activities for retail operations. She approves of the reforms which have taken place in Germany and France, where the supervisor is able to assess whether there should be a separation between retail banking activities and trading in the event of excessive risks. (Original version in French by Mathieu Bion)