CEBS’s comments on EU framework for cross-border crisis management in the banking sector
03 February 2010
CEBS comments are focused on the definition of the common minimum toolbox available to competent authorities in each member state to enable them to identify at an early stage potential problems in a bank, and to take appropriate action. It also addresses the conditions for the use of these tools.
On 20 January 2010, CEBS provided an answer to the EU Commission’s communication on an EU Framework for Cross-Border Crisis Management in the Banking Sector. The views expressed in this contribution cover the different areas contained in the communication issued by the Commission on 20 October 2009.
CEBS has focused on it to enable them to identify at an early stage problems in a bank, and to take appropriate action. It also addresses the conditions for the use of these tools. CEBS believes that a common set of tools should be coupled with an enhanced cooperation framework between competent authorities.
Scope and objectives
Objectives in developing the policy framework
As set out in CEBS’ earlier advice, CEBS supports the Commission undertaking work in this area. It has become apparent in the current crisis that there are some gaps and obstacles in the EU regulatory framework that should be addressed.
CEBS agrees that one of the key objectives of this work should be to ensure that all national supervisors have adequate tools to identify problems in a bank at an early stage and to be able to take appropriate action (to prevent further decline, or to restore it to a viable condition).
Accordingly, CEBS has focussed on the issue of a common toolbox available to competent authorities in each member state.
CEBS agrees with the objective of enabling all banks, including cross-border banks, to fail in an orderly fashion that does not cause material disruption to the banking system or financial stability. In pursuing this objective, CEBS would expect the future framework to reduce moral hazard and increase market discipline.
CEBS has, therefore, commented on the tools that should be available to competent authorities in this area. The option to allow an institution to fail or to use the available tools to remedy a situation should always be assessed by the authorities on a case by case basis.
Both of these objectives should be underpinned by an objective to improve the exchange of information and co-operation between competent authorities.
However, in pursuing both of these objectives CEBS considers that, from a supervisory perspective, it will be important to consider carefully the costs and impact in ‘normal’ times of any changes on (a) firms and (b) the effectiveness of supervision.
© CEBS - Committee of European Banking Supervisors
