Presentation of the ECB Framework Regulation

Organisational aspects

Tallinn, 26 February 2014

Timeline

2

3 Nov. 2013

SSM Regulation enters into

force

30 Jan. 2014

Launch of public

consultation

Public hearing

Supervisory Board endorses draft

Framework Regulation at its

first meeting

7 March

End of public consultation

4 Feb. 4 Nov.

SSM takes over

banking supervision

Submission to the

European Parliamen

t

7 Feb.

19 Feb.

May

Publication in Official Journal

by 4 May

Publication on the

ECB’s website

Legal basis

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ECB shall adopt and make public (by 4 May 2014) a framework to organise the practical arrangements for the implementation of the cooperation between the ECB and NCAs within the SSM.

ECB shall adopt and make public (by 4 May 2014) a framework to organise the practical arrangements for the implementation of the cooperation between the ECB and NCAs within the SSM.

Articles 6 and 33(1)

SSMR

Articles 6 and 33(1)

SSMR

ECB shall publish by means of regulations and decisions the detailed operational arrangements for the implementation of its supervisory tasks.

ECB shall publish by means of regulations and decisions the detailed operational arrangements for the implementation of its supervisory tasks.

Article 33(2) SSMR

Article 33(2) SSMR

ECB may adopt regulations for the carrying out of its supervisory tasks.The framework will be an ECB regulation.

ECB may adopt regulations for the carrying out of its supervisory tasks.The framework will be an ECB regulation.

Article 4(3) SSMR

Article 4(3) SSMR

Structure of the draft Framework Regulation

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Part I – General provisions

Part II – Organisation of the SSM

Part III – Operation of the SSM

Part IV – Methodology for assessing significance

Part V – Common procedures

Part VI – Significant credit institutions

Part VII – Less significant credit institutions

Part VIII – Macro-prudential supervision

Part IX – Close cooperation

Part X – Administrative Penalties

Part XI – Access to information, reporting, investigations and on-site inspections

Part XII – Transitional and final provisions

ECB as a banking supervisor – institutional impact

5

Shared Services (IT, Legal, HR, Statistics)

Functioning of the SSM

6

ECBoversees the

system

NCAs

Significant

banks

Less significa

nt banks

Direct supervisio

n

May “call-up” direct

supervision

SSMSSM

Grants/withdraws authorisations, assesses qualifying holdings

Grants/withdraws authorisations, assesses qualifying holdings

JST(ECB/NCAs staff)

Direct supervision

Banking supervision by the SSM

Direct supervision by the ECB

Direct supervision by the NCAs

Significant banksas defined under the SSMR by:•size •importance for EU or domestic economy •significant cross-border activities

Less significant banks

Less significant bankswhen necessary to ensure

consistent application of high supervisory standards

Banks that have requested or received ESM or EFSF public financial assistance

Three most significant banks in each participating Member State

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Methodology for assessing significance

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• assessment and ongoing review of a bank’s significance

• determination of the date on which a change of status/supervisor takes effect and its impact on pending procedures

• ECB takes decisions on changes in status

• assessment and ongoing review of a bank’s significance

• determination of the date on which a change of status/supervisor takes effect and its impact on pending procedures

• ECB takes decisions on changes in status

Procedures

Procedures

• main criterion• Framework Regulation specifies how the total

value of assets is determined • significance is determined at highest level of

consolidation

• main criterion• Framework Regulation specifies how the total

value of assets is determined • significance is determined at highest level of

consolidation

SizeSize

• of significant banks • of less significant banks and their respective

NCAs• published on the ECB’s website and updated

regularly

• of significant banks • of less significant banks and their respective

NCAs• published on the ECB’s website and updated

regularly

ECB listsECB lists

Supervision of Significant Banks

Supervisory Tasks conferred to the SSM:

• Authorization, withdrawal and assesment of qualifying holdings

• Passport

• Ensure compliance with requirements on capital, leverage, liquidity, and governance

• Supervisory review and Supervisory powers (Pillar 2)

• Consolidated supervision and supervision of conglomerates

• On-site inspection

• Early intervention where a bank breaches requirements (coordinating with resolution authorities)

• Sanctions• Macroprudential tasks

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Micro-prudential tasks

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• ECB will chair colleges for any significant groups with branches/subsidiaries outside the SSM and in non-EU countries

• ECB will participate in the colleges for non-SSM groups with branches/subsidiaries that are significant within the SSM

• ECB will chair colleges for any significant groups with branches/subsidiaries outside the SSM and in non-EU countries

• ECB will participate in the colleges for non-SSM groups with branches/subsidiaries that are significant within the SSM

Colleges of

Supervisors

Colleges of

Supervisors

• CRD IV procedures no longer apply for the establishment of branches within the SSM

• for banks within the SSM wishing to establish a branch outside the SSM, the ECB will be the home authority for significant banks and the NCA for less significant banks

• CRD IV procedures no longer apply for the establishment of branches within the SSM

• for banks within the SSM wishing to establish a branch outside the SSM, the ECB will be the home authority for significant banks and the NCA for less significant banks

Passport issues

Passport issues

• ECB will act as coordinator if the bank belonging to the financial conglomerate is significant

• supervision of insurance firms is excluded

• ECB will act as coordinator if the bank belonging to the financial conglomerate is significant

• supervision of insurance firms is excluded

Financial conglomerat

es

Financial conglomerat

es

Supervision of significant banks

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NCAs•assist the ECB by preparing a draft decision upon request or on their own initiative •follow the ECB’s instructions

Close cooperation

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• ECB’s position will be comparable to the one it holds in respect of supervised entities and groups established in euro area countries

• ECB may not act directly vis-à-vis banks but through instructions, requests or guidelines addressed to NCAs

• ECB’s position will be comparable to the one it holds in respect of supervised entities and groups established in euro area countries

• ECB may not act directly vis-à-vis banks but through instructions, requests or guidelines addressed to NCAs

General principlesGeneral

principles

• establishment of JST for each institution• ECB will be consolidating supervisor• NCAs adopt decisions in respect of significant

supervised entities only upon the ECB’s instructions

• establishment of JST for each institution• ECB will be consolidating supervisor• NCAs adopt decisions in respect of significant

supervised entities only upon the ECB’s instructions

Significant

institutions

Significant

institutions

• ECB may issue general instructions, guidelines or requests to the NCA under close cooperation

• ECB may issue general instructions, guidelines or requests to the NCA under close cooperation

Less significan

t institutio

ns

Less significan

t institutio

ns

ECB’s supervisory powers

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• ECB may require information that it considers necessary from any person referred to in Article 10(1) SSMR

• before making a request, the ECB will take into account the information available to NCAs

• ECB may require information that it considers necessary from any person referred to in Article 10(1) SSMR

• before making a request, the ECB will take into account the information available to NCAs

Request for informatio

n

Request for informatio

n

• ECB is the competent authority for supervisory reporting by significant banks and NCAs for that by less significant banks

• NCAs are the single entry point and perform initial data checks

• ECB is the competent authority for supervisory reporting by significant banks and NCAs for that by less significant banks

• NCAs are the single entry point and perform initial data checks

Supervisory

Reporting

Supervisory

Reporting

draft Framework Regulation sets out the procedures for:

• the decision to conduct an on-site inspection• the establishment of an on-site inspection

team• the notification of an on-site inspection

draft Framework Regulation sets out the procedures for:

• the decision to conduct an on-site inspection• the establishment of an on-site inspection

team• the notification of an on-site inspection

On-site inspection

s

On-site inspection

s

Transitional provisions

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• ECB sends a decision to significant banks of their status two months prior to start of supervision

• bank has the right to be heard

• ECB sends a decision to significant banks of their status two months prior to start of supervision

• bank has the right to be heard

Start of the ECB

supervision

Start of the ECB

supervision

• supervisory procedures initiated by NCAs will generally continue after the ECB starts supervision

• supervisory procedures initiated by NCAs will generally continue after the ECB starts supervision

Continuity of existing procedure

s

Continuity of existing procedure

s

• transitional provisions will apply to countries that join the euro area after the start of the SSM

• comprehensive assessment of banks established in countries that join the euro area

• transitional provisions will apply to countries that join the euro area after the start of the SSM

• comprehensive assessment of banks established in countries that join the euro area

Countries adopting the euro

Countries adopting the euro

Continuity of

cooperation

agreements

Continuity of

cooperation

agreements

• MoUs and other cooperation agreements will continue to apply

• ECB may decide to participate

• MoUs and other cooperation agreements will continue to apply

• ECB may decide to participate

Thank you for your attention

Jean-Christophe Cabottejean-christophe.cabotte@ecb.europa.eu

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