The Netherlands Bankers’ Association believes that contingency planning can be a useful tool for both the institution and the supervisor in the early intervention phase. However, NVB does not support the idea of drawing up a ‘living will”.
The NVB supports the Commission in her efforts to design a framework that will ensure that financial institutions will put in place tools and instruments for cross-border crisis management. This framework should in our view be seen in relation to the recommendations van de Cross-border Bank Resolution Group, calling for more and better cooperation between supervisors. This taken together should help institutions and supervisors to better understand their business and corporate structure.
The NVB feels that it is important to emphasize to following points when further discussing the future framework.
First of all, prevention and early intervention are the most important elements in whatever framework will be proposed. In that respect closer and better cooperation between supervisors and other national authorities, both on a national and international level is essential. The Cross-border Bank Resolution Group has published recommendations which can be of use in this respect. While it remains up to the financial institutions to decide on the business models and corporate structures, closer cooperation between supervisors and financial institutions will furthermore contribute to a better knowledge of the structure and business model of the bank and facilitate in depth discussions.
In that respect, the NVB feels that contingency planning can be a useful tool for both the institution and the supervisor in the early intervention phase. However, NVB does not support the idea to draw up a ‘living will”. We have majors concerns that this approach ignores the fact that circumstances require specific actions.
Secondly, supervisors need to use the tools they already have available in a more resolute and pro-active manner. NVB’s experience has shown that supervisors already have sufficient tools at their disposal, but focus too much on the legal applicability and possible liability effects of their actions.
Thirdly, establishing ex-ante private sector funding arrangements is not practical nor is it feasible. No fund (be it DGS or otherwise) is big enough to support a cross border banking failure.
Finally, NVB believes the scope of the framework should be non-exclusive and should not only take into account banks that are considered to be systemically relevant. The current crisis has clearly shown that such an approach ignores the fact that other institutions may become a factor of instability because of the nature of the distress in a specific sector or jurisdiction at a moment in time.
© NVB
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