EBA欧洲银行-EBA-BSG-2017-28Minutes-of-the-Joint-BoS_BSG-meeting-03-May-2017_for-publication29_6页_162kb

EBA BSG 2017 Joint Meeting Summary

Core Content

The EBA (European Banking Authority) and the Banking Stakeholder Group (BSG) held a joint meeting on 3 May 2017 in London, focusing on key issues affecting the EU banking sector, including supervisory cooperation, digital disruption, and interest rate changes. The agenda was approved, and the meeting covered several critical topics, such as the supervision of significant branches, regulatory challenges in the digital era, and micro-prudential responses to interest rate fluctuations.

Main Points and Key Information

Item 2: Activities of the BSG

• The BSG chairperson outlined recent activities, including responses to EBA's Consultation Papers.
• Collaboration with other stakeholder groups from EIOPA and ESMA was emphasized, particularly for joint responses to ESAs Consultation Papers.
• An Ad-Hoc Working Group on regulatory sandboxes was established to develop a BSG position paper on this topic.

Item 3: Banks' Network of Subsidiaries and Branches

• EBA staff presented the different operational choices banks make (branches, subsidiaries, cross-border services).
• Enhanced cooperation between home and host competent authorities (CAs) is needed for the supervision of large systemically important branches.
• The CRD (Capital Requirements Directive) and BRRD (Banking Resolution and Recovery Directive) provide a legal framework for branch supervision, with a focus on supervisory convergence.
• The draft EBA Guidelines on supervision of significant branches were highlighted as introducing a proportionate approach to supervisory cooperation.
• Reporting limitations from branches to the EU level and financial stability concerns related to macro-prudential measures were identified.
• Third countries' branches are not well-covered under current EU regulations.
• Finland has a high market share of branches, raising concerns about the limited tools available to host authorities for risk mitigation.
• The Nordic MoU signed in December 2016 between Finland, Sweden, Norway, and the ECB was presented as a supervisory cooperation tool.
• There was a call for amendments to the legislative framework to grant host supervisors more powers, especially in group governance, risk management, and liquidity.
• Industry representatives supported the EBA guidelines but requested clarification on subsidiary-to-branch transformation and resolution coordination.
• A trend towards branchification in the EU and subsidiarisation in third countries was noted, with functional regulation being suggested as a better approach than entity-based regulation.

Item 4: Disruption in the Banking Industry

• Digital transformation is seen as a major change in the financial industry, offering benefits for customers but posing challenges for traditional banks.
• FinTech is disrupting the value chain of retail financial services, including payments, lending, and asset management.
• Regulatory capital requirements are perceived as creating an unlevel playing field, giving FinTech firms an advantage over traditional banks.
• There was a call for function-related regulation instead of entity-based regulation, with governance being a key area for focus.
• Banks' profitability is attributed to high NPLs and cost structures, not just excessive regulation.
• Partnerships between traditional banks and FinTech firms are increasing, though cooperation is complex due to mistrust between incumbents and new entrants.
• The EBA is working on mapping FinTech services and detecting regulatory arbitrage, with a focus on consumer protection and level playing field.
• Supervisory and resolution authorities should be active participants in the integration and consolidation of the financial industry.

Item 5: Interest Rate Changes and Micro-Prudential Responses

• Interest rate trends and their impact on banks were discussed, with ECB/SSM highlighting IRRBB (Interest Rate Risk in the Banking Book) assessments.
• Sensitivity analysis and multiple interest rate shocks (flattener, steeper, parallel shifts) were used to evaluate risks.
• The 2017 SREP stress tests will focus on IRRBB, alongside other aspects, to assess banks' interest rate risk exposure, modelling assumptions, and derivatives positions.
• BSG members raised concerns about the forward-looking nature of ECB/SSM assumptions, suggesting that interest rate shocks should consider broader economic impacts.
• Derivatives were highlighted as a significant source of interest rate risk, with their value being 10 times the EU GDP.
• EBA staff presented two interest rate scenarios: monetary policy rate increases and global risk premium reversals.
• Net interest income is expected to improve with rising rates, though funding strategies show a mixed picture, with client spreads varying by country and long-term debt rates expected to decline.

Conclusion

The meeting underscored the importance of supervisory convergence, enhanced cooperation between home and host authorities, and adaptation to digital disruption. It also highlighted the challenges posed by interest rate changes and the need for a functional regulatory approach. The EBA and BSG members agreed on the necessity of cooperation and regulatory innovation to address evolving risks and support the Single Market.