CEBS’ role in the CRD implementation

1. CEBS’ role in the CRD implementation José María Roldán | 12 Jan 2006

2. Outline • Evolving markets and EU banking supervision • CEBS - main tasks and challenges • Consistent implementation of CRD • Convergence in supervisory practices • A review of progress made so far • Supervisory disclosure • Guidelines related to the CRD implementation • Harmonisation of reporting requirements • What next? • Monitoring and assessing CEBS’ work • Continued efforts to build European supervisory culture José María Roldán | 12 Jan 2006

3. Evolving markets and the EU banking supervision • Banking market: • Cross-border activity • Consolidation • Centralisation of business functions at group level • Outsourcing of activities • Diversity of banking structures • Regulatory framework: • Basel II (CRD) risk-focused supervision • IAS/IFRS new standards, with impact on supervisory tools • Post FSAP implementation and convergence of practices Response: the Lamfalussy process - CEBS José María Roldán | 12 Jan 2006

4. CEBS – main tasks • Advice to the Commission • Consistent implementation and application of directives (especially CRD) and convergence of supervisory practices (Lamfalussy level 3) • Exchange of information José María Roldán | 12 Jan 2006

5. CEBS – main challenges • Potential divergence in directive implementation • National options and discretions • Additional layers of national rules (“goldplating”) • Different interpretations • Complex and possibly fragmented supervisory process • Misalignment of legal and operational structures in banking groups • Risk of overlapping or conflicting supervisory assessments • Validation of models and Art. 129 • Supervisory Review Process (Pillar 2) • Administrative burden • Compliance costs • Differences in supervisory reporting • Duplication of contacts José María Roldán | 12 Jan 2006

6. A review of progress made so far • Potential divergence in implementation Supervisory disclosure framework • Complex and possibly fragmented supervisory process Enhanced home-host co-operation, Pillar 2 and validation guidelines • Administrative burden Harmonised reporting requirements José María Roldán | 12 Jan 2006

7. Supervisory disclosure • Supervisors are required to publish (CRD Art. 144): • Rules and guidance • How options and national discretions are exercised • Supervisory review and evaluation • Statistical data on key implementation issues • Additional information on reporting frameworks • Easy access and meaningful comparison  peer group pressure • Internet access via CEBS website www.c-ebs.org • Links to national websites • Comparable information • Common language - English José María Roldán | 12 Jan 2006

8. Supervisory disclosure José María Roldán | 12 Jan 2006

9. Guidelines related to the CRD implementation • CRD Art. 129 to 132, enhanced co-operation and role of the consolidating supervisor • CEBS Guidelines, a practical framework for: • Co-ordinated planning • Structured exchange of information • Avoidance of redundancies • Optimal use of supervisory resources • Concrete examples: risk assessment and validation José María Roldán | 12 Jan 2006

10. Guidelines related to the CRD implementation • Supervisory Review Process (Pillar 2): • Ensure institutions have adequate capital to support all risks in their business • Encourage institutions to manage risk • Foster an active dialogue between institutions and supervisors • Covers the relationship between: • Supervisor’s SREP (the Supervisory Review and Evaluation Process); and • Institution’ ICAAP (the Internal Capital Adequacy Assessment Process) • Proportionality is the key: • For large complex institutions  in-depth and “tailor-made” • For smaller institutions  likely to be quite standardised José María Roldán | 12 Jan 2006

11. Harmonisation of reporting requirements • Common frameworks for: • Financial data for prudential purposes • Reporting of the solvency ratio • CRD and IFRS  window of opportunity for change: less administrative burden for cross-border groups; limited impact on small, local banks • Common templates and possibilities presented by new technologies (XBRL) • Consultation: criticisms on size and national flexibility • But new rules are complex and supervisors move from quite different starting points José María Roldán | 12 Jan 2006

12. What next? • Compendium of CEBS’ standards, guidelines and recommendations • for supervisors and market participants • flexible, internet-based structure, easy to update • consistent terminology, definitions • Inventory of implementation issues: case studies, surveys • Networking mechanisms – day-to-day co-operation • Training programmes and staff exchange • New tools, if necessary José María Roldán | 12 Jan 2006

13. Conclusions • Differences across countries not wiped out, but visible, so that priorities for further work can be identified • Not a single supervisory interface, but a more coordinated and streamlined process • Not a single compliance process, but greater commonality of approaches and a process for further convergence where needed • a structured process for convergence and common European supervisory culture José María Roldán | 12 Jan 2006

14. Questions? • Thank you! 14 José María Roldán | 12 Jan 2006

15. Contact details Name: José María Roldán E-mail: josemaria.roldan@c-ebs.org