26 September 2013

Speech by EBA/Enria at ESE Conference: The new role of the EBA in the Banking Union

First, while the tasks remain fundamentally unchanged, the Banking Union introduces a new sense of urgency in the performance of our tasks and calls for a higher degree of ambition in a number of areas. In primis, this is the case for the delivery of the Single Rulebook, a truly uniform and integrated set of rules for banks in the whole Single Market. If national discretions were to remain, they would complicate enormously the task of the SSM, which would then be required to enforce different rules for the banks falling under its responsibility. But the point applies also to our efforts in the area of harmonisation of key prudential definitions and enhanced disclosure of comparable data, as an effectively integrated market can function well only on the basis of reliable information.

Second, the EBA has to take up a new role in safeguarding the integrity of the Single Market. The crisis, in particular the adverse loop between banks and their sovereigns which has hampered the functioning of bank funding markets and led to a fragmentation of bank lending along national lines, have seriously damaged the Single Market. To a large extent, the origin of the disease has to be traced in a fault in the design of the Economic and Monetary Union, which the Banking Union is expected to repair. Single supervision and an integrated safety net will go a long way in addressing the banking problems experienced during the sovereign debt crisis. But at least for some time, the SSM and the proposed Single Resolution Mechanism (SRM) will not encompass the whole European Union. Addressing the current segmentation of the Single Market will require a more focused effort to restore seamless operating capacity for banks throughout the Single Market.

In order to get an idea of the relevance of this task, let me remind you that out of the 43 large EU cross-border banking groups that are subject to the monitoring of the EBA, only five have business exclusively within the euro area. More than two-thirds of the banking groups headquartered in the euro area have significant market shares in other Member States, and the same proportion of European groups headquartered in those Member States have significant business within the euro area. This means that the EBA will have to play a new role in ensuring that the SSM and the other competent supervisory authorities in the EU develop common supervisory methodologies and practices, which can support stricter cooperation in colleges of supervisors and the capacity to effectively anticipate and deal with the crisis of a cross-border group. Of course, the Single Rulebook is a key ingredient also in the repair of the Single Market, as the lack of room for regulatory arbitrage and competition is a necessary condition to restore trust and cooperation amongst supervisors.

Enria then provided details of the main areas in which the EBA will have to focus its efforts going forward. 

In conclusion, he said, the institutional set up for banking regulation supervision and resolution is becoming increasingly European, but not necessarily less complex. The establishment of the SSM (and soon of the SRM) will provide new colours to the tasks of the EBA too. The added value that we can bring to the new institutional set up builds on the work we have accomplished so far. The Single Rulebook becomes increasingly important, also for the performance of the tasks of the ECB. The need for coordination between the authorities of participating and non-participating Member States becomes a necessary condition to preserve the existence and restore the functioning of the Single Market. In turn, this requires the development of common benchmarks and methodologies for the conduct of supervision in the whole Single Market.

Link to full speech

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