The President of the Spanish Banking Association, José María Roldán, yesterday emphasized the need to ensure uniform rules of the game for all European banks, both for the most significant institutions directly subject to the Single Supervisory Mechanism and for those under its indirect supervision through national authorities, as well as between institutions in the euro area and those in the rest of the European Union.
“It is of utmost importance that all European banks can compete on a level playing field under the new single supervision scheme,” stated José María Roldán in his capacity as chairman of the task force of the CEPS (Centre for European Policy Studies) that prepared the report “ECB Banking Supervision and Beyond,” coordinated by Karel Lannoo.
The report, which was presented today at the European Parliament headquarters, seeks to address the numerous uncertainties and challenges posed by the new European banking supervision, in force since November 4.
During the presentation of the report, José María Roldán noted that it will take years to create a common supervisory culture, making it necessary to apply a pragmatic approach to ensure a smooth transition to the new system. “The new supervisory model must replace current structures and not be superimposed on existing ones. Likewise, it must avoid duplication of efforts and eliminate inconsistencies,” he added.
Given the relevance of the banking sector for financing the economy and the importance that the new Juncker Commission attaches to the quality of regulation (better regulation), the CEPS recommends in its report that the way financial regulation is currently approached in the EU be reviewed. The single rulebook, the report notes, must take into account the diversity of banking systems and the fact that supervised banks have different systemic risks. Meanwhile, the ECB must attempt to harmonize the use of discretions that the single rulebook grants to national authorities, in order to create a truly level playing field.
Likewise, it is necessary, according to the report, to address the potential duplication in supervisory tasks between the EBA and the ECB through an evaluation process by the European Supervisory Authority (ESA). Although the EBA’s supervisory function will be important for countries that have remained outside the SSM, some overlaps may disturb markets and create confusion. Tasks such as stress tests, participation in supervisory colleges, and data collection must be coordinated and integrated as much as possible.
Regarding supervisory practices, the report understands that they must converge through the development of a Single Supervisory Mechanism’s own approach and the Supervisory Manual, which must be applied to both significant banks and smaller institutions. Good practices developed by the Joint Supervisory Teams should be transmitted to the competent national authorities so they can be applied in the supervision of less significant institutions.
The report also raises the issue of language, since an enormous amount of information is available only in national languages. Likewise, accountability presents aspects susceptible to improvement, given that IFRS (International Financial Reporting Standards) only apply to banks listed in the EU/EEA and on a consolidated basis. This means that harmonized accounting standards are only used in less than half of the banks supervised by the ECB, which requires reflection by legislators.
Finally, José María Roldán concluded by noting that the Single Supervisory Mechanism should not be an additional supervisor, but the single supervisor. That is, it should in no case generate double supervision.
