Set-up and start of NCA relations the Single Supervision III … · 2015-09-30 · 9 global systemically important banks (G-SIBs) are headquartered within the SSM 5 Overview of the

Set-up and start of the Single Supervisory Mechanism

Fudan-Frankfurt Financial Research Forum

Frankfurt am Main, 25 September 2015

Giacomo Caviglia

Head of Division Supervisory Oversight &

NCA relations

Directorate General Micro-Prudential

Supervision III

Rubric

www.bankingsupervision.europa.eu ©

Euro Area Banking Union

Supervision Resolution

Common Rules EU28 (Single Rulebook)

Deposit

Guarantee

Prudential

Requirements

Recovery &

ResolutionState-aid

Single

Supervisory

Mechanism

(SSM)

ECB

NCA NCA NCA

Single Resolution

Authority and

Fund

NRA NRA NRA

Elements of the Banking Union

2

Single

Supervisory

Mechanism

Single

Resolution

Mechanism

(SRM)

Rubric


Achievement of key milestones laid the

foundations for the start of the SSM operations on

4 November 2014

3

SSM Preparatory Work

Legal framework

SSM Supervisory

Model

Compre-hensive

Assessment

Data reporting

frameworkStaffing

IT systems

• First preparatory work for the

SSM initiated following euro

area summit of 29 June 2012

• Entry into force of SSM

Regulation on 3 November

2013

one transitional year to finalise

preparations for the operational

start

Rubric


Enhance financial integration

Leverage on the best (of the

national) supervisory practices

Reduce (crisis) coordination

failures among national supervisors

Reduce the supervisory ‘burden’

through the harmonization of

supervisory practices

4

Restore confidence in a

healthier banking system

Make customers’ deposits

safer through three

mechanisms

Help the economy recover,

building on a more stable

banking system

SSM goals and expected benefits

Intrusive, tough and fair supervision

Rubric


Total assets: ~ EUR 26,000 bn (for

comparison: USA USD 14,700 bn)

Direct supervision of ~ 120 significant

institutions (comprising ~ 1,200

individual institutions) and ~ 3,400 less

significant institutions

Total assets of the significant

institutions amount to ~ EUR 21,000

bn, those of LSIs to ~ EUR 5,000 bn

9 global systemically important

banks (G-SIBs) are headquartered

within the SSM

5

Overview of the SSM scope

Rubric

www.bankingsupervision.europa.eu © 6

Significant Institutions (SIs) Less Significant Institutions (LSIs)

Direct supervision by Joint Supervisory

Teams (JSTs)Indirect supervision by the ECB

Joint Supervisory Teams comprise staff

from the ECB and from National

Competent Authorities (NCAs)

NCAs carry out supervision in practice,

the ECB conducts oversight of the

supervisory system and high priority

institutions

Important: peer group analysis and

benchmarking of institutions

Important: specific national / regional

knowledge

Consistent supervision

Guidance provided by the ECB

SSM Risk Assessment System

SSM covers SI and LSI institutions in one integrated

supervisory system

Rubric


ECBdirect

supervisionindirect

supervisionoversees the system

Joint Supervisory Teams

(JSTs)

National Competent Authorities

(NCAs)

Less significant institutionsSignificant institutions

supports

Principles of coordination between ECB and NCAs:

assisting, instructing, cooperating, exchanging information

The SSM functions as one integrated system of national and

ECB supervisors

Horizontal divisions

Rubric


Horizontal

Supervision &

Specialised Expertise

Secretariat

This organisational chart shows the first two layers of the organisational structure.

DG (Directorate General)

D (Directorate)

Supervisory

Oversight &

NCA Relations

Institutional &

Sectoral

Oversight

Analysis &

Methodological

Support

Authorisation

Centralised

On-site

Inspections

Crisis

Management

Enforcement &

Sanctions

Methodology &

Standards

Development

Planning &

Coordination

of Supervisory

Examination

Programme

Supervisory

Policies

Supervisory

Quality

Assurance

Internal Models

Risk Analysis

Decision-Making

Process

Decision-Making

Policy

Direct Supervision Indirect Supervision

Micro-prudential

Supervision I

Micro-prudential

Supervision II

Micro-prudential

Supervision III

Micro-prudential

Supervision IV

Secretariat to the

Supervisory Board

± 90 credit

institutions

Joint Supervisory

Teams

Joint Supervisory

Teams

± 30 credit

institutions

SSM operating structure

Rubric


JST coordinator

(Chair)

Core JST

Sub-coordinators

(support JST coordinator)

Team of experts

from NCAs and

ECB

approval / validation

of high-level

decisions

support JSTs

ECB intermediate

structure (DGs)

Governing

Council

Supervisory

Board

Horizontal

divisions

Established for every significant banking group

Responsible for day-to-day supervision and for implementing the annual examination programme (SEP)

Deep integration between ECB and NCAs

Joint understanding of bank’s conditions

JSTs are key structure of the SSM

Rubric


• Continuous evaluation of quantitative and qualitative information Business Model Analysis

Internal Governance and Risk Management Analysis

Risk level and risk control analysis for capital related risks

Risk level and risk control analysis for liquidity risk

Own Funds analysis

• ICAAP / ILAAP reviews are essential element of the overall analysis

• Quantitative supervisory tools are used to challenge and verify

Benchmarking

Stress testing

• Supervisory measures are taken as necessary

Quantitative capital measures

Quantitative liquidity measures

Other supervisory measures

10

The SSM Risk, Capital and Liquidity assessment leverages

information from several building blocks

Rubric


Establishment of the framework for indirect

supervision of less significant institutions

11

Indirect Supervision


Supervisory

Oversight

Institutional and

Sectoral Oversight

Analysis and

Methodological Support

Promote best

supervisory

practices and

develop common

standards

Ensure

consistency of

supervisory

outcomes

Oversee sectors

and country-

specific

institutional

arrangements

Exchange

information with

NCAs on high-

priority LSIs

Participate in crisis

management

Prepare

methodologies for

LSI supervision

(e.g. risk-based

prioritisation of

banks, SREP

application)

Analyse common

sources of risk

Rubric


Applying the ECB’s tools for indirect supervision

12


Ex ante notification of procedures and draft decisions by NCAs to ECB ECB assessment of draft material decisions and procedures

Regular ex post reporting by NCAs’ on their supervisory activities

Issuance of ECB regulations, guidelines or general instructions to NCAs

Thematic reviews: deep dives into specific risk areas

Possibility to request information and to perform on-site inspections

Possibility to take over supervision of individual LSIs at any time

Staff exchanges

Tools at the ECB’s disposal :

Rubric


Thank you for the attention

13

Set-up and start of NCA relations the Single Supervision III … · 2015-09-30 · 9 global systemically important banks (G-SIBs) are headquartered within the SSM 5 Overview of the

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