CEBS published its final guidelines for establishing an enhanced framework for cooperation between consolidating supervisor and host supervisors of EU banking groups and investment firms operating in several EU jurisdictions. The guidelines enhance the practical operational networking of national supervisors. They contain sections on general cooperation, distinguishing between subsidiaries and branches, and guidance more specifically related to the approval process of model validation.
The guidelines reflect the requirements of the Capital Requirements Directive as banking groups are centralising their risk management activity. Recent market developments show that there is a need to develop further an integrated, risk based and coordinated approach to supervision. Responding to the CEBS consultation, some companies would like to see the role of the consolidating supervisor further enhanced. However, this was not possible under the legal framework created by the new Capital Requirements Directive.
For cross-border groups, all supervisors could be required to undertake the Supervisory Review and Evaluation Process (SREP) within the respective Member States. For supervisory cooperation to be effective, the SREP should therefore be based on the same principles, applying similar procedures.
The starting point for these Guidelines is the legal text, predominantly Article 129, 131 and 132 of the CRD, which set the statutory framework for a much enhanced collaborative approach to the supervision of cross-border banking groups. Related issues such as the possible need to upgrade the EU framework for deposit insurance schemes, the lender of last resort function or crisis management provisions will not be addressed in this paper as they go beyond the scope of mere supervisory coordination and cooperation discussed in this paper.
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