2012年-CEPS欧洲政策研究中心_Banking_Supervision_Returns_to_the_Forefront_2页_39kb

Banking Supervision Returns to the Forefront: Summary

Core Content

The document, titled Banking Supervision Returns to the Forefront, published by CEPS on 21 September 2007, discusses the challenges faced by the EU's regulatory and supervisory framework in response to the financial crisis that originated in the US subprime mortgage market and quickly spread to Europe. It emphasizes the need for improved coordination, rule implementation, and supervisory cooperation across the EU to prevent future crises and maintain the reputation of Europe's financial market.

Main Viewpoints

The crisis has exposed several critical issues within the EU's financial regulatory and supervisory system:

• Divergent Responses by Central Banks: The European Central Bank (ECB) and the Bank of England responded differently to the crisis. The ECB acted swiftly to provide liquidity, while the Bank of England delayed its response, leading to a bank run in the UK. This highlights the importance of a unified and timely approach to crisis management across the EU.

• Flaws in Rule Implementation and Enforcement: The Basel II rules, which came into effect in January 2007, were not properly applied by some European banks. For example, IKB, a German bank, had a credit guarantee to a conduit that represented 40% of its assets, violating both Basel II and EU large exposure rules. This suggests a broader oversight problem related to conduits and special investment vehicles (SIVs).

• Delays in Implementing MiFID: The Markets in Financial Instruments Directive (MiFID), which was set to take effect on 1 November 2007, faced significant delays in transposition across member states. These delays hindered the ability to address market turmoil through timely regulatory adjustments.

• Need for Integrated Supervisory Framework: Despite progress in regulatory cooperation, supervisory cooperation remains weak. The Lamfalussy process has facilitated some level of coordination, but there is a lack of common rules for responding to ad hoc supervisory issues. National-level tools and bilateral cooperation are still prevalent, leading to inconsistencies in oversight.

Key Information

• Crisis Origin and Spread: The crisis began in the US subprime mortgage sector and rapidly impacted European banks, especially those with significant real estate lending exposure.

• Impact of Short-Term Funding: The fear of losses in real estate loans led to rising interbank lending rates and a collapse in the short-term lending market, particularly affecting smaller banks.

• Deposit Guarantee Rules in the UK: The UK's use of an optional clause in the EU's 1994 directive, which limited refunds above £2000 to 90% of deposits, contributed to the bank run by reducing depositor confidence.

• Basel II and Large Exposure Rules: The IKB case illustrates how the Basel II rules on off-balance sheet exposures were not effectively enforced, leading to systemic risks.

• MiFID Implementation Delays: The delayed transposition of MiFID has prevented timely measures to address conflicts of interest, internal governance, and transparency in financial transactions.

• Call for Concerted Action: The document stresses the need for a coordinated approach involving monetary policy authorities, policymakers, and supervisors to align crisis management procedures and create a more integrated response to financial instability.

Policy Recommendations

1. Enhance Crisis Management Coordination: Central banks and supervisory authorities should work together to ensure a unified and timely response to financial crises.
2. Strengthen Rule Implementation and Enforcement: Regulatory frameworks like Basel II and MiFID must be strictly enforced, with a focus on addressing systemic risks posed by conduits and SIVs.
3. Improve Supervisory Cooperation: The EU needs to develop common rules and integrated oversight mechanisms to address ad hoc supervisory challenges effectively.
4. Promote Transparency and Market Discipline: Supervisors should encourage transparency and ensure that deposit guarantee systems do not undermine market discipline.

Conclusion

The document underscores the urgency of reforming the EU's banking supervision framework to ensure resilience against future financial shocks. It calls for a more integrated, coordinated, and enforced system that addresses both regulatory and supervisory gaps, ultimately safeguarding the integrity and reputation of Europe's financial market.