Paulina Dejmek spoke on Commissioner Barnier’s behalf and she said that the Conglomerates Directive from 2002 has not been correctly applied and therefore there is a need for a review. The Commission will present a “quick fixing” before the summer taking into consideration the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate. The “quick fixing” of the Directive will also look at the alignment of the Directive with the new ESAs.  However, Ms Dejmek emphasised that the Commission is conscious that further changes will be needed to capital requirements for financial conglomerates.These will be done in a second phase lasting 12 months.

 

The conference was divided in the following three sessions:

 

The debate on the supervisory framework was mainly based on the Joint Forum Review of the differentiated Nature and Scope of Financial Regulation.  The three panellists, Marta Estavillo from Banco de España, Klaas Knot from the Dutch Ministry of Finance and Thomas Huertas FSA Director presented the main objective of the report.

 

They emphasized that it is key to identify the regulatory differences across sectors, as conglomerates cover three areas: Insurance, Banking and Securities.  According to the report, there are many similarities but one of the main inconsistencies is that the uniform “banking capital standard” does not exist for insurance or for securities at a global level.

 

Regarding the Volker rule’s proposal to limit risky behaviour within banks, Klaas Knot stressed that this rule is the wrong way to go for the EU as well as for the US. He explained that it is a unilateral measure from the Obama administration and did not include a proper consultation process.

 

Mario Nava, DG Markt’s head of Banking and Financial Conglomerates Unit, moderated this debate and asked the industry to present a “to do list” for the Commission regarding the supervision of financial conglomerates. The main requests from the industry were the followings:

·         The Commission should focus on activities rather than institutions

·         Give a clear definition of capital as it is the first line of defence for financial conglomerates

·         Enforce the rules. If rules are not enforced then there is a need to give the power of punishment to the supervisor.

·         Involve the industry in the process by consulting them on a more frequent basis.

 

David Wright, DG MARKT Deputy Director General, moderated this debate where Charles Littrell Executive General Manager from APRA (Australian Prudential Regulation Authority) and  Lance Auer from the NY FED explained how the supervision of financial conglomerates is structured in Australia and in the US.

 

Charles Littrell presented the following tactics in order to achieve an efficient supervision of Australian conglomerates:

 

·         No dark corners of information should exist

·         Healthy risk management

·         Backstop capital regime

·         Empower the board

·         Pragmatic simplicity

·         Flexible, proactive supervision

 

Concerning the US financial Bill, Lance Auer said that the proposed Systemic Risk Council will not supervise conglomerates but will decide which institutions are complex and systemically relevant and it will be the FED that will supervise them. 

 

Report prepared by Silvia Merino-Rueda of GrahamBishop.com