Consultation on the application of Directive 2007/44 EC as regards acquisitions and increase of holdings in the financial sector

The aim of Directive 2007/44/EC was to ensure that supervisory authorities are as specific and transparent as possible if they have doubts about the sound and prudent management of the financial institution concerned, and to minimise the scope for public authorities to invoke prudential rules in order to hinder cross-border mergers and acquisitions for protectionist reasons.

According to Article 6 of the Directive, the Commission has to review the application of the Directive and submit a report to the European Parliament and the Council, together with any appropriate proposals to review the Directive. The responses to this consultation will provide useful information on how the Directive was applied in the EU Member States and will help the Commission to prepare the report on the application of the Directive.

Period of consultation. From 08.12.2011 to 10.02.2012

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How to submit your contribution
We welcome contributions from citizens, organisations and public authorities. If you are answering this consultation as a citizen, please click here to submit your contribution If you are answering this consultation on behalf of an organisation, please click here to submit your contribution. If you are answering this consultation on behalf of a public authority, please click here to submit your contribution. Received contributions will be published on the Internet. It is important to read the specific privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.
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Consultation paper Text of the directive
Contact details
Responsible service:	DG Internal Market and Services
E-mail:	MARKT-M-A-CONSULTATION@ec.europa.eu
Postal address:	European Commission, B–1049 Brussels

Results of consultation and next steps

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Dealing with the Challenges of Macro Financial Linkages in Emerging Markets

World Bank Office Jakarta.Bali,December 1,2011. The World Bank, in cooperation with Bank Indonesia, today kick off a joint international seminar to examine the challenges in dealing with macro-financial linkages in emerging markets, along with the appropriate policy responses. One of the key policies options to be explored over the course of the two-day seminar would be the impact of Basel III banking regulations on emerging economies. Basel III is the new global standard on bank capital adequacy and liquidity, developed in response to the deficiencies in financial regulation revealed by the global financial crisis. In the financial sector, Basel III aims to strengthen not just micro prudential regulations, but also the macro prudential regulations that help stabilize financial systems as a whole.

“The global financial crisis has raised the importance of macro-financial linkages and the need for macro prudential regulations. Given the state of global finances, the time is right for regulators from emerging economies to meet and discuss how they can strengthen financial systems and reduce vulnerability against external shocks,” says Dr. Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management.

The requirements of Basel III include the need for banks to hold 4.5% of common equity and 6% of Tier I capital of risk-weighted assets. Basel III also introduces additional capital buffers, such as a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum 3% leverage ratio and two required liquidity ratios. The proposed measures under Basel III aim to dampen the pro-cyclicality of the financial sector and to reduce systemic risks, including by introducing measures to address liquidity.

“The policy debate currently taking place is largely in the context of the advanced industrial countries. Yet emerging markets face a different reality which would require more customized policy measures,” says Dr. Swati Ghosh, Economic Adviser, World Bank. “In emerging markets, the interaction between real and financial sectors often accentuates pro-cyclicality.”

“Emerging markets are particularly vulnerable to hot money flows, which can exacerbate financial pro-cyclicality and real sector cycles,” says Dr. P.S. Srinivas, the World Bank’s Lead Financial Economist for Indonesia.

The “Dealing with the Challenges of Macro Financial Linkages in Emerging Markets” seminar brings together central bank governors, deputy governors and senior officials from various regulatory and supervisory authorities from ASEAN+3 and G-24 countries.

World Bank Office Jakarta.Indonesia Stock Exchange Building.Tower 2, 12th Floor (62-21-5299-3000)
Contact: In Jakarta:Randy Salim: (62-21) 5299-3. rsalim1@worldbank.org

In Washington DC: Mohamad Al-Arief  (1-202) 458-5964 malarief@worldbank.org a

Russian Federation.Targeted Detailed Assessment of Observance of Basel Core Principles for Effective Banking Supervision

A targeted assessment of the Basel Core Principles for Effective Banking Supervision (BCP) was conducted which revealed some improvement since the 2007 assessment. The principles reviewed covered the following risk areas: major acquisitions, capital adequacy, risk management process, credit risks and provisions, exposure to related parties, abuse of financial services, remedial actions and consolidated supervision.

Although the CBR continues to improve its supervisory process and issue recommendations to banks on monitoring and managing risks, it lacks the supervisory framework to support enforcement of those recommendations and that inhibits improvement in BCP compliance. CP-9 on problem assets and provisioning was upgraded to largely compliant but CP-11 on exposure to related parties was downgraded to materially noncompliant.

International Monetary Fund.November 29,2011.Country Report No. 11/336

Russian Federation:Targeted Detailed Assessment of Observance of Basel Core Principles for Effective Banking Supervisiond

The Economic Crisis: Did Financial Supervision Matter?

The Asian financial crisis marked the beginning of worldwide efforts to improve the effectiveness of financial supervision. However, the crisis that started in 2007–08 was a crude awakening: several of these improvements seemed unable to avoid or mitigate the crisis.

This paper brings the first systematic analysis of the role of two of these efforts - modifications in the architecture of financial supervision and in supervisory governance - and concludes that they were negatively correlated with economic resilience.

Using the emerging distinction between macro- and micro-prudential supervision, we explore to what extent two separate institutions would allow for more checks and balances to improve supervisory governance and, thus, reduce the probability of supervisory failure.

Author/Editor: Masciandaro, Donato ; Vega Pansini, Rosaria ; Quintyn, Marc
Authorized for Distribution: November 01, 2011. Series: Working Paper No. 11/261
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
The Economic Crisis: Did Financial Supervision Matter?

Has the global banking system become more fragile over time?

This paper examines time-series and cross-country variations in default risk co-dependence in the global banking system. The authors construct a default risk measure for all publicly traded banks using the Merton contingent claim model, and examine the evolution of the correlation structure of default risk for more than 1,800 banks in more than 60 countries.

They find that there has been a significant increase in default risk co-dependence over the three-year period leading to the financial crisis. They also find that countries that are more integrated, and that have liberalized financial systems and weak banking supervision, have higher co-dependence in their banking sector.

The results support an increase in scope for international supervisory co-operation, as well as capital charges for "too-connected-to-fail" institutions that can impose significant externalities

World Bank. Author: Anginer, Deniz;Demirguc-Kunt,Asli.Document Date: 2011/10/01. Document Type: Policy Research Working Paper Report Number: WPS5849.Volume No: 1 of 1

PDF	38 pages	Official Version	[2.66 mb]
Text		Text Version*

Cross border banking supervision : incentive conflicts in supervisory information sharing between home and host supervisors

The global financial crisis has uncovered a number of weaknesses in the supervision and regulation of cross border banks. One such weakness was the lack of effective cooperation among banking supervisors.

Since then, international bodies, such as the G-20, the Financial Stability Board and the Basel Committee have actively promoted the use of supervisory colleges. The objective of this paper is to explore the obstacles to effective cross border supervisory information sharing. More specifically, a schematic presentation illustrating the misalignments in incentives for information sharing between home and host supervisors under the current supervisory task-sharing anchored in the Basel Concordat is developed.

This paper finds that in the absence of an ex ante agreed upon resolution and burden-sharing mechanism and deteriorating health of the bank, incentive conflicts escalate and supervisory cooperation breaks down. The promotion of good practices for cooperation in supervisory colleges is thus not sufficient to address the existing incentive conflicts.

What is needed is a rigorous analysis and review of the supervisory task-sharing framework, so that the right incentives are secured during all stages of the supervisory process. For this purpose, it is essential that policy makers integrate and harmonize the current debates on crisis management, resolution policy and good supervisory practices for cross border banking supervision

Author: D'Hulster,Katia;Document Date:  2011/11/01. Document Type: Policy Research Working Paper. Report Number: WPS5871.Volume No:  1 of 1

PDF	39 pages	Official Version	[2.73 mb]
Text		Text Version*