10 May 2016

Bruegel: The European Union remains a laggard on banking supervisory transparency

Financial supervisors must provide the public with more information about the European banking sector in order to ensure financial stability. The level of transparency in national supervision of banks has dropped since 2013.

In the European Union, we find that the already low level of supervisory transparency has generally not improved, and even deteriorated, in early 2016 compared to a previous survey made in 2013 (Gandrud and Hallerberg, 2014). Supervisory authorities, including the European Central Bank (ECB) in its new capacity as euro-area financial supervisor, should dramatically step up their efforts to provide the public with more information about Europe’s massive banking sector. [...]

At the European level, the inception of banking union in the euro area is a major change of policy regime since the previous survey, but has not yet made enough of a difference in terms of supervisory transparency. ECB Banking Supervision has regularly updated its list of supervised entities, and occasionally released data from exercises such as the 2014 and 2015 Comprehensive Assessments, but does not regularly publish quantitative data about euro-area banks beyond a highly imprecise indication of balance sheet size. [...]

Also at the European level but predating banking union, the European Banking Authority (EBA) has continued to make important improvements in the area of supervisory transparency. But its efforts are insufficiently institutionalised, and do not cover the full spectrum of banks in the European Union. The EBA published results of a transparency exercise in December 2013, EU-wide stress tests in October 2014, and another transparency exercise in November 2015. These covered respectively only 64, 123, and 105 banks (of which one from Norway, the rest being all headquartered in the EU), so that the vast majority of Europe’s more than 3,500 banks, representing perhaps a quarter of total assets, are left out. [...]

Conclusion

Despite some positive, though insufficiently institutionalised, moves at the EU level, the trend in member states is towards less supervisory transparency. This is worrying, because the further successful integration of the EU financial sector requires financial market participants and the public to be able to access information on banks’ activities and health across borders. Some other jurisdictions provide much more detailed, regular and frequent information. In the United States, roughly 8,200 banks are required to make quarterly “call reports” that have data on the respective bank’s earnings, balance sheet, asset quality, liquidity and capital. A federal agency, the Federal Financial Institutions Examinations Council (FFIEC), makes this information available online, generally the day after it receives it. Evidently, technical reasons are not enough to justify the current lack of supervisory transparency in the European Union.

Full article on Bruegel

 

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