Introduction to the ECB/SSM supervisory framework Dr. Thomas Gstädtner Head of Division 9 DG Micro-Prudential Supervision II Finantsinspektsioon Estonian Financial Supervision Authority „Bank and supervision – together or separately” Tallinn on the 30th March 2017 ECB-RESTRICTED
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Introduction to the ECB/SSM supervisory framework
Dr. Thomas GstädtnerHead of Division 9DG Micro-Prudential Supervision II
Finantsinspektsioon Estonian Financial Supervision Authority „Bank and supervision – together or separately”Tallinn on the 30th March 2017
Structure- combined of ECB and NCAs of participating member states.- ECB as a core to the system is responsible for operation and functioning of SSM.- Within the SSM tasks are allocated between ECB and NCAs.- SSM carries responsibility for supervision of credit institutions in all participating member
states, with either direct or indirect involvement of ECB.
Key targets (Article 1 SSM Regulation)- contributing to the safety and soundness of credit institutions and the
stability of the financial system- unity and integrity of the internal market…- …based on equal treatment of credit institutions
Legal basis- SSM Regulation and SSM Framework regulation
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Structure of Single Supervisory Mechanism ECB-RESTRICTED
Single Supervisory Mechanism (SSM) (4/7)Allocation of Tasks between ECB and NCAs
• SSM is responsible for – direct and indirect – supervision of about 4,900 entities in all participating member states.
• Supervisory roles and responsibilities are allocated based on significance of supervised entities.
• To be treated as “significant” at least one of different criteria has to be fulfilled (e.g. relative national size, absolute size, cross boarder activity).
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Significant institutions
ECB supervises significant institutions directlywith support of NCA via JSTs
Less significant institutions
NCAs continue to exercise supervision, but with oversight function of ECB
Structure of Single Supervisory Mechanism ECB-RESTRICTED
Structure of Single Supervisory Mechanism ECB-RESTRICTED
ECB REGULATION ECB GUIDE Legally binding act, generally and directly applicable to all credit institutions directly supervised by the ECB
Non-binding legal instrument providing guidance to JSTs on how to treat individual banks’ applications
Art. 10 SSMR Request for informationAsk legal and natural persons to provide all information that is necessary in order to carry out the tasks conferred on it by this Regulation
Art. 12 SSMR On-site inspections
conduct all necessary on-site inspections at the business premises
Art. 16 SSMR Supervisory powers
e.g. require…:- …capital add-ons- …reinforcement of
arrangements, processes, mechanisms and strategies
- …application of specific provisioning policy
- …limitation of business and disinvestments
- …limitation of variable remuneration
- …limitation of distribution to shareholders
- …additional reporting- …
Art. 18 SSMR Sanctioning
Impose sanctions up to relevant gains/avoided losses or up to 10% of total annual turnover
Art. 11 SSMR General investigationsmay conduct all necessary investigations of any [legal or natural] person
Single Supervisory Mechanism (SSM) (6/7)Legal Powers
Less-Significant InstitutionsOversight Function of ECB (2/2)
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Proportionality is a key element and is applied to all supervisory processes to determine the engagement level.
• DG-MS3’s key task is to ensure the consistent application of high supervisory standards and supervision of the highest quality, hence creating a level playing field across the SSM. – DG-MS3 follows a risk-based approach and works in close cooperation with NCAs.
• Collaboration with NCAs takes place in various ways:– to discuss general topics and proposals to the Supervisory Boards– to share best practices and foster high quality supervision (via Working Groups and drafting
teams);– and to exchange information on specific issues (at staff level).
ECB-RESTRICTEDStructure of Single Supervisory Mechanism
• Existence of college depends on complexity of cross-border banking group and relevance of single entities for overall group risk (only relevant entities in scope of college [case B])
• Depending on significance of entity in SSM context either ECB or NCA member of college
For more or less the first time use of a harmonised analytical approach for banks across the Eurozone promoting consistency and integrity with regard to supervisory treatment, processes, applicable rules and risk analysis
Assess the resilience of financial institutions to adverse market developments Contribute to the overall SREP to ensure institutions’ capital and liquidity adequacy, as well as sound
risk coverage and internal processes. Ensure a consistent treatment of all SIs supervised by the SSM
Objectives
1 Combined number of SIs included in EBA and SSM SREP stress test samples does not equal total number of SIs under SSM supervision, as some exceptions apply (e.g. banks that were subject to a comprehensive assessment in 2015 or will be in 2016, or SIs that are subsidiaries of other SSM SIs, already covered at the highest level of consolidation).
ECB-RESTRICTED
EU-wide exercise under EBA coordination in cooperation with EU-COM, ESRB, ECB & NCAs
94 SIs1
Results not public
51 banks Publication of
final results
(there of 38 SSM SIs participating in EBA stress test, but results used for