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Extending the scope of the ESFS to all cross border banks would be marginally beneficial to financial stability, compared to the significant supervisory costs incurred combined with a bulky and expensive supervisory infrastructure, the Luxembourg Bankers’ Association argues.
“We think that a distinction between systemic and non-systemic banks is more relevant in terms of financial stability and of supervisory efficiency”, ABBL says in its response to the Commission consultation. The definition of the systemic banks should be based on a combination of qualitative and quantitative criteria to be applied at group level, it argues.
Systemic banks should be assessed by the degree of complexity and of interconnectedness of a bank with the rest of the system, ABBL says. Quantitative criteria could be the level of Tier one capital, the ratio of foreign assets to total assets, the ratio of foreign income to total income, and the ratio of foreign employment to total employment.
The EU systemic banks could be placed under the direct supervision of the new Banking Authority, which would directly constitute and lead the colleges of supervisors, define the supervisory programme, allocate tasks among supervisors, and so forth, ABBL proposes.
EU systemic bank groups supervised by the ESFS should ideally be subject to complete EU-wide financial stability arrangements, ABBL states. These should include a single set of tools for crisis prevention, a specific winding-up regime, and common principles and ex-ante agreements for organising the cost sharing.
Furthermore, the ABBL calls for further clarification of the governance of the future EU Authorities and proposes a “one member, one vote” principle as a fundamental principle of the future Authorities decision-making mechanism.