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Introductory remarks European legislative initiatives Jerzy Pruski Bank Guarantee Fund Poland

Introductory remarks European legislative initiatives Jerzy Pruski Bank Guarantee Fund Poland. EFDI - IADI Conference Strengthening Financial Stability – Deposit Insurance Contributions Rome, 1 October 2010. 1. European Union Risk areas. 2. Risk sources - main areas.

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Introductory remarks European legislative initiatives Jerzy Pruski Bank Guarantee Fund Poland

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  1. Introductory remarks European legislative initiatives Jerzy PruskiBank Guarantee Fund Poland EFDI - IADI ConferenceStrengthening Financial Stability – Deposit Insurance Contributions Rome, 1 October 2010 1

  2. European Union Risk areas 2

  3. Risk sources - main areas Global economy Broad range of benefits of globalisation • Insufficient information • Crisis contagion • Limiting risk requires actions in three areas: • domestic markets • cross-border issues • large financial institutions 3

  4. Harmonization and common EU financial stability rules European initiatives Domestic markets Basel III DGS Directive Resolution funds Area not addressed Cross-border issues EU institutions, e.g.: ECB - European Central Bank ESRB - European Systemic Risk Board EBA - European Banking Authority Large financial institutions Assets transfer „Living wills” Cooperation 4

  5. European Union Large banks perspective 5

  6. Banking sector size and concentration • Differentiations • - banking sector asset size • proportion of potential risk to banking sector asset size • - proportion of potential risk to GDP in different states Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010) 6

  7. Banking sector size and concentration in relation to country fiscal position Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010) 7

  8. Banking sector size and concentration in relation to country fiscal position Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010) 8

  9. Conclusion Existing regulations and undertaken initiatives Problems partially addressed Domestic markets Additional activities required Cross-border issues Area not addressed Large financial institutions Main challenge Problem particular serious in Europe Interventions in LFI carries the risk of sovereign debt default Problematic fiscal position and extremely limited scope for intervention in a distressed bank by individual country • Monetisation public debt : • cannot be applied by individual country • unclear mandate for ECB • European Financial Stability Facility Vast asymmetry between actual benefits from Large Financial Institutions and potential cost of resolution 9

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