The Bank and its Organization Bank Supervision Financial

The Bank and its Organization Bank Supervision (Financial) Market Law and Regulation October 18 th, 2016 1

The bank and its organization 1. 2. • • The banking business: history and current practices Categories of banks Commercial/investment banks Multifunctional groups/universal banks: branches, subsidiaries, banking groups • Domestic/international banks 3. Bank and “industry” 4. EU banking activities 2

Bank supervision 1. The organization of supervision • European banking supervision: SSM, EBA, ECB (ESCB and Eurosystem) • National supervision 3

TABLE OF CONTENTS A. Introductory remarks B. First Pillar- Prudential supervision and prudential regulation of credit institutions 1. European body: Single Supervisory Mechanism 2. Single Rulebook: CRD IV and CRR C. Second Pillar- Resolution of unviable credit institutions 1. European body: The Single Resolution Mechanism 2. Single Rulebook: BRRD D. Third Pillar: Deposit Insurance 1. European body: no development 2. Single Rulebook: DGS 4

Towards a European Banking Union: Elements of change and continuity (italics denote new elements) Financial policy instruments Authorisation and micro-prudential supervision of credit institutions Authorities/rules Single Supervisory Mechanism Single Rulebook Micro- and macro-prudential regulation of credit institutions Single Rulebook Macro-prudential oversight of the financial system European Systemic Risk Board Reorganisation and winding-up of credit institutions National authorities and mutual recognition between Member States Resolution of credit institutions Single Resolution Authority Single Resolution Fund Single Rulebook Operation of deposit guarantee schemes Single European Deposit Guarantee Scheme Single Rulebook Last resort lending Emergency Liquidity Assistance (ELA): national central banks or the ECB? Provision of subsidies to systemically important institutions Potentially the ESM 5

The Single Supervisory Mechanism On 29 October 2013, the following Regulations were published: Council Regulation (EU) No. 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, and Regulation (EU) No. 1022/2013 of the European Parliament and of the Council amending Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards the conferral of specific tasks on the European Central Bank pursuant to Council Regulation (EU) No 1024/2013 6

The Single Supervisory Mechanism 1. Main features Two Pillars European Central Bank (hereinafter the ‘ECB’), and National Competent Authorities The ECB will supervise directly the systemically important credit institutions incorporated in: • euro area Member States (128 credit institutions covering 85% of euro area bank assets), • Member States with a derogation, which will establish a ‘close cooperation’ between the ECB and the national competent authority 7

The Single Supervisory Mechanism 2. Systemically important credit institutions (a) Credit institutions, financial holding companies, mixed financial holding companies on a consolidated basis or branches of credit institutions established in non-participating Member States that meet any of the following conditions: • the total value of their assets exceeds € 30 billion • the ratio of their total assets over the GDP of the participating Member State of establishment exceeds 20%, unless the total value of their assets is below € 5 billion 8

The Single Supervisory Mechanism Systemically important credit institutions (cont. ) (b) Those for which public financial assistance has been requested or received directly from the EFSM or the ESM (c) Following a notification by a national competent authority (d) In any case, the three most significant credit institutions in each Member State (e) The ECB may also, consider an institution to be of significant relevance where its cross-border activity is substantial 9

The EU ESAs supervisory structure European Systemic Risk Board (ESRB) Macroprudential supervision General Board • ECB President and vice-President • Governors of national central banks • a Member of the European Commission • Chairpersons of the three European Supervisory Authorities • Chairs and the two vice-Chairs of the Advisory Scientific Committee • Chair of the Advisory Technical Committee Micro-prudential information + Members of the General Board without voting rights: • Representatives of national supervisors • President of the Economic and Financial Committee Macro-prudential information, early risk warnings and recommendations to supervisors European Supervisory Authorities (ESAs) Microprudential supervision SSM + European Banking Authority (EBA) European Insurance and Occupational Pensions Authority (EIOPA) European Securities and Markets Authority (ESMA) 10

Appendix: How do we regulate at national level • INSTITUTIONAL (sectoral) • REGULATION BY OBJECTIVE (Prudential supervision/conduct of business) • SINGLE REGULATOR (integrated) • FUNCTIONAL - by activity 11

Financial regulation/supervision Country Banking Securities Austria FSA FSA Belgium CB/FSA Denmark FSA FSA Finland FSA FSA France CB/PA/IP Germany FSA FSA Greece CB S CB/G Ireland CB CB Italy CB/S S/CB IPF/CB Luxembourg FSA FSA/I Netherlands CB/S Portugal CB/S S/CB I Spain CB/S S/CB G Sweden FSA FSA UK (macro FPC) PRA(CB) / FCA EU (macro ESRB) SSM / EBA ESMA/CA EIOPA/CA United States B/CB/S/S Is/CB Japan FSA FSA PRA(CB) / FCA Insurance/Pension fund CB/PF PRA(CB) / FCA / PF CB (Central bank), PA (Prudential Authority on banks, securities and insurance, different from CB), B (Prudential Agency for banks), IP (Investor protection Authority for banks, securities and insurance), S (Securities Authority), I (Insurance Authority), PF (Pension Fund Authority), IPF (Insurance and Pension Fund Authority), FSA (Single prudential and investor protection regulator), G (Government department), CA (National Competent Authorities)

A model: UK as of April 1° 2013 Bank of England Protecting and enhancing the (macro)stability of the UK financial system Financial Policy Committee (committee of Bo. E) Contributing to the Bank’s financial stability objective through MACRO-PRUDENTIAL regulation FPC powers of recommendation and direction Financial Conduct Authority Prudential Regulation Authority (subsidiary Bo. E) (company limited by guarantee) Firm-specific prudential regulation (and supervision) MACRO/MICRO prudential regulation/supervision Systemic infrastructure (central counterparties, settlement systems and payment systems) MICRO-PRUDENTIAL regulation/supervision Conduct regulation (and supervision), markets, issuers, prudential regulation of non-PRA firms CONDUCT regulation/supervision prudentially significant firms (banks, insurers and major investment firms) prudential & conduct regulation/supervision smaller investment firms & exchanges, other financial service providers

4 -peaks with macrostability to ECB and ESCB and microstability: prudential regulation and supervision separated from (subsidiary? ) ECB European System of Central Banks European System of Prudential Supervision European System for Investor Protection European System for Competition Euro Level Coordination Committee ECB (and ESRB) Frankfurt European Prudential Authority London/Frankfurt European Investor Protection Authority Paris European Antitrust Authority Bruxelles National Level Coordination Committee National Central Banks Prudential Supervisory Authority Investor Protection Authority Antitrust Authority