The project of a Banking Union - Warsaw School of … · The project of a Banking Union . 10178...
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Towards Financial Stability? -
The project of a Banking Union
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
© Prof. Dr. Markus C. Kerber 1
I. European Banking Union: What is the situation? II. Steps to the institutional implementation of the Banking Union III. Legal problems and critical issues in terms of institutional economics
© Prof. Dr. Markus C. Kerber 2
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
I. European Banking Union: What is the situation?
A name for a vast project comprising: 1. A single rulebook;
2. A centralized monitoring and supervision of banks within the EU;
(Single Supervision Mechanism)
3. An integrated mechanism for solving banking crisis; (Single Resolution Mechanism)
4. A common framework of deposit insurance
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Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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Single Rulebook – CRD IV-Paket
• - Regulation No. 575/2013 as of June 26th 2013 • - Directive 2013/36/EU as of June 26th 2013 -> Applicable from January 1st 2014 • -> material banking supervision regulation • -> is accomplished by various regulatory acts of legal
implementation
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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Single Supervision Mechanism (SSM)
• Proposal of the EU Commission of September 12th 2013
• October 15th 2013: adoption of 2 regulatory acts by the
ECOFIN-Council 1. so-called SSM-Regulation 2. Regulation to amend the EBA-Regulation (EU) 1093/2010 • Publication in the Official Journal has been made on
October 29th 2013
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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The resolution and liquidation of banks (Single Resolution Mechanism) 1. Proposal by the EU Commission as of June 6th 2012 for a Directive
regulating the recovery and resolution framework for credit institutions and investment firms(so-called BRRD);
2. Proposal by the EU Commission as of July 10th 2013 for a
regulation of the EP and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund (so-called SRM-Regulation).
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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BRRD – Bank Recovery and Resolution Directive
June 27th 2013 ECOFIN-Council reached agreement on a common content Since then Trilog-Negotiations between the Council and EP with the involvement of the Commission
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SRM-Regulation
• Working group meetings in the Council
• Working-out the position of the EP
• Time limit: closing of Trilog-negotiations in march 2014 to allow for its adoption before the end of the current legislative period (EP-elections in may 2014)
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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II. Steps to the institutional implementation of the Banking
Union
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www.europois-online.org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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1. Timeline of the SSM Regulation
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Nov 4 2014 (1 year after entry into force of the Regulation)
Legislative phase – SSM Proposal, ECOFIN
Trilogue phase with the European Parliament
Finalisation of SSM (and EBA) Regulation(s) legislative process
Implementation phase
Effective start of ECB supervision
Jun 2012
Sep 2012
Dec 2012
Apr 2013
12 Sep
Van Rompuy Report
Commission proposal
ECOFIN
Adoption in EP plenary
Pre-legislative policy phase
15 Oct Adoption in EU Council 3 Nov Likely entry into force
Political agreements in Council/ COREPER
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2. The Inter-Institutional Agreement IIA
Transparency and accountability: The IIA between the EP and the ECB The Agreement is basically finalised as acknowledged by the declaration of the two Presidents, Mr Schulz and Mr Draghi, but formally subject to the approval by the EP plenary (7-10 October) and the Governing Council. It details the provisions for the transparency and accountability of the ECB as supervisor toward the EP: • EP can veto the ECB’s choice of the Chair and Vice Chair of the Supervisory
Board, • the Chair of the supervisory Board will be heard in front of the EP at least
twice a year, • hold confidential oral discussions with MEPs of the ECON Committee, the
ECB must provide “comprehensive and meaningful records of the proceedings” of the Supervisory Board.
• at the same time, appropriate provisions ensure the safeguarding of confidential information.
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3. Structure of preparatory work
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WS1 Mapping of Euro Area banking System
WS2 Supervisory legal issues
WS3
Supervisory model for the SSM
WS4 Supervisory data reporting framework
WS5 Balance Sheet Assessment
Task Force on Supervision
High-Level Group chaired by the ECB
President
Project Team
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4. Scope of direct supervision According to the Regulation, the ECB will supervise all credit
institutions in SSM-member countries. It will have direct supervisory powers over the largest banks that
meet any of the following criteria:
© Prof. Dr. Markus C. Kerber 13
Assets over EUR 30 bn
5. Organisation of the micro-prudential function
Micro-Prudential Supervision I DG
Large Complex Banks
Secretariat Div. Division
Micro-Prudential Supervision II DG
Micro-Prudential Supervision III DG
Micro-Prudential Supervision IV DG
Direct Supervision Indirect Supervision
Horizontal Supervision
Large Cross-Border Banks
Large Domestic Banks
Medium-sized Domestic Banks
Subsidiaries & Specialists B.
Horizontal Supervision
Specialized Expertise
± 30 banking groups ± 100 banking groups
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Micro-prudential function
1 Director General 2 Deputy Dir. Generals 7 Divisions
1 Director General 2 Deputy Dir. Generals 8 Divisions
1 Director General 2 Deputy Dir. Generals 10 Divisions
1 Director General 3 Divisions
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Defining BSA objectives Restoring confidence
in euro area banks
• Meets the expectations of markets as the analyst reports indicate expectations of a thorough recapitalisation
• Ensure credibility and comparability between different jurisdictions and banks
• Confidence-building at the start of SSM supervision
• Fact-finding and build-up of SSM expertise and collaboration
• Strengthen health of EU banks
Increasing transparency
• To be achieved through a comprehensive assessment, incl. BSA • Possible follow-up actions include recapitalisation against a to-be-determined threshold
As it has possible fiscal impact, backstop commitments are required upfront
6. Primary objectives of the BSA
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Three phases of the BSA
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Phase I Risk-based portfolio selection
Phase II
Execution • Data integrity validation (DIV) • Analysis and review of the exposures in the sample • On-going quality assurance
Phase III Collation, final quality assurance, consistency checks, reporting to the Supervisory Board
Stress test
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7. Timeline of SSM-related recruitments
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Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14
SB Chair
Senior Management
Management Assistants Pool of external candidates to backfill internals
Internal call for expression of interest
Middle Management Initial priority: DG Micro I and DG Micro II
Expert level
Regular ECB recruitment including financial stability and shared services
DG Micro III and DG Micro IV
Initial priority: DG Micro I and DG Micro II DG Micro III and DG Micro IV
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8. Financial Supervision in Europe
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DG Micro I 221 FTEs
Div. 1 Div. 4 Div. 5 Div. 6 Div. 7 Div. 2 Div. 3
DG Micro II 192 FTEs
Div. 1 Div. 5 Div. 6 Div. 7 Div. 8 Div. 4 Div. 2 Div. 3
~ 43 significant banking groups
Indirect Supervision over less significant banking groups
DG Micro III 80 FTEs
Div. 1 Div. 3 Div. 2
Horizontal Supervision & Specialised Expertise Secretariat
Secretariat Div. 25 FTEs
DG Micro IV 251 FTEs
Crisis Managemen
t Div.
Sup. Quality Assurance
Div.
Authorisation Div.
Sup. Policies Div.
Methodology & Standard
Dev Div.
Enforcement & Sanctions
Div.
Risk Analysis Div.
Planning & Coord. of SEP Div.
Centralised on-site Div.
Model Validation
Div.
~ 84 significant banking groups
~ 3,500 credit institutions directly supervised by NCAs
Organisational structure and total headcount estimates for 2013-2015 endorsed by the GovC on 19 June
Direct Supervision over significant banking groups
Details on the Prudential Supervision function
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III. Critical comments on legal problems and pitfalls in terms of Institutional Economics 1. Institutional Economics 2. Legal problems 3. Unadressed issues 4. Conclusions
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10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
1. Institutional Economics
- Should a supranational central bank have the function of banking supervision?
- Collateral policy is always a source of risk. Liquidity policy in the framework of monetary policy could encourage as well a risk-taking attitude by banks.
- Will there be no longer “national bias”? French lobbying for special positions shows that centralization of banking supervision does not do away with national bias. On the contrary!
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Email: [email protected] Internet: www europois online org
FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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- SSM and SRM are not the same entity: Instead of passing the case from supervision immediately to resolution, it will take ages to liquidate a bank which, as a result of the supervision process, is deemed to be unable to survive.
- SRM and its funding method create an incentive for the less contributing countries and banks to use funds for the sake of those banks which are in particular at risk.
- Special problem: The contribution to the Single Resolution Fund by German mutual and saving bank will be multiplied, whereas this banking sector has never used rescue funds before.
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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2. Legal Problems - Art. 127 AEUV and Art. 352 AEUV are no basis for a
SSM - Art. 114 AEUV (Treaty for the Functioning of the
European Union) is no legal basis for SRM - SRM as a by-pass Treaty - no legal protection in a national administrative court,
but only in the European Court of Justice
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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3. Unadressed Issues - The comprehensive risk assessment by ECB concerning
122 banks of significant size is a test for the “no national bias thesis”.
- Till the build-up of a 55 billion resolution fund, the Banking Union will need a backstop solution. The ESM would be well fitted, but would then – economically speaking – have access to Central Bank money
- A single rulebook without the UK and Sweden will invite to regulation arbitrage.
- The collusive relation between banks and states will not be abandoned but will through ESM be reinforced.
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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4. Conclusions How EFSF/ESM and ECB will work together in the Banking Union
10178 Berlin, Hackescher Markt 4 Tel. 030-843 14 136 Fax 030-843 14 137
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FAKULTÄT VIII WIRTSCHAFT UND MANAGEMENT INSTITUT FÜR VOLKSWIRTSCHAFTSLEHRE UND WIRTSCHAFTSRECHT Prof. Dr. iur. Markus C. Kerber
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How to circumvent the interdiction of ECB to intervene on primary market
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