04 May 2016

EBA's Andrea Enria: Ensuring transparency in the European financial system

OMFIF City Lecture by Andrea Enria, Chairperson of the European Banking Authority.

The financial crisis has significantly affected my thinking about transparency. My experience at the EBA has made me acutely aware that opaqueness is a powerful crisis accelerator. If market participants are unable to compare and contrast the situation of banks vis-à-vis a specific risk, they are naturally inclined to think the worst of each and every bank. The whole market grinds to a halt. If authorities act in an unpredictable way, for instance by taking different courses of action in apparently similar cases or by concealing the information that is at the basis of their decisions, volatility is likely to increase and any shock can easily destabilise the system.

This is why we, at the EBA, have consistently focused our efforts in increasing the quantity and quality of bank disclosures, enhancing the comparability and accessibility of bank data, and recommending greater disclosure of authorities’ assessments.

The transparency of bank data is particularly important in the EU, where the lack of comparability of key bank information across countries has been a major hindrance to the functioning of the Single Market, and even to supervisory cooperation.

As I tried to document in this lecture, we have already made good progress. I am confident that we will soon move to a new setting, in which any interested party can easily access all relevant bank information, drawn from supervisory reporting (i.e., without any additional burden for banks), on a regular basis – ideally quarterly –, and in a single place – the EBA website. This is what is already happening in the United States, and we should aim at achieving at least the same results in the Single Market. Ideally we should exploit all the possible synergies between Pillar 3 disclosures and supervisory reporting, thus achieving an integrated set of information, easily available and consistent across banks.

I am also convinced that, in the new regulatory setting, supervisors and resolution authorities will have to become more and more transparent about their own decisions, especially when these may affect the payments to investors or even the value and nature of the financial instruments they hold. If the buck is going to stop with shareholders and creditors of a bank, it will be the duty of authorities to put them in a position to exercise their role in an effective way, correctly pricing capital and debt instruments and imposing an adequate level of discipline on bank management.

Full speech

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