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Has the relaxation of capital and liquidity buffers worked in practice?

29-10-2020

We analyse the recent policy decisions made by the ECB and the national authorities related to capital, liquidity, and shareholders’ remuneration aimed at promoting credit supply from the banking sector to the coronavirus-afflicted economy. We forecast the impact of the regulatory decisions based on the empirical literature, discuss the factors that reduce the banks’ incentives to expand loan portfolios and develop policy suggestions intended to mitigate the effect of these factors.

We analyse the recent policy decisions made by the ECB and the national authorities related to capital, liquidity, and shareholders’ remuneration aimed at promoting credit supply from the banking sector to the coronavirus-afflicted economy. We forecast the impact of the regulatory decisions based on the empirical literature, discuss the factors that reduce the banks’ incentives to expand loan portfolios and develop policy suggestions intended to mitigate the effect of these factors.

Údar seachtarach

Alexandra MATYUNINA, Steven ONGENA

Barriers to Competition through Joint Ownership by Institutional Investors

15-05-2020

In recent years, the phenomenon of common ownership by institutional investors has sparked considerable debate among scholars about its impact on competition and companies’ corporate governance. This study analyses some specific features of common ownership by institutional investors in the European banking sector. It also examines closely the tension between competition policy and corporate governance tools aimed at enhancing shareholder engagement. This document was provided by the Policy Department ...

In recent years, the phenomenon of common ownership by institutional investors has sparked considerable debate among scholars about its impact on competition and companies’ corporate governance. This study analyses some specific features of common ownership by institutional investors in the European banking sector. It also examines closely the tension between competition policy and corporate governance tools aimed at enhancing shareholder engagement. This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON).

Údar seachtarach

S. FRAZZANI, K. NOTI, M. P. SCHINKEL, J. SELDESLACHTS, A. BANAL ESTAÑOL, N. BOOT, C. ANGELICI

Public hearing with Andrea Enria, Chair of the ECB Supervisory Board

10-12-2019

This note is prepared in view of a regular public hearing with the Chair of the Supervisory Board of the European Central Bank (ECB), Andrea Enria, which will take place on 12 December 2019. The briefing addresses (i) Single Supervisory Mechanism (SSM) priorities for 2020, (ii) Banks’ profitability issues; (iii) Stress testing developments; (iv) some individual bank cases; (v) supervisory issues and policies (anti-money laundering, Brexit, and impact of Basel III and IFRS9), and (vi) the completion ...

This note is prepared in view of a regular public hearing with the Chair of the Supervisory Board of the European Central Bank (ECB), Andrea Enria, which will take place on 12 December 2019. The briefing addresses (i) Single Supervisory Mechanism (SSM) priorities for 2020, (ii) Banks’ profitability issues; (iii) Stress testing developments; (iv) some individual bank cases; (v) supervisory issues and policies (anti-money laundering, Brexit, and impact of Basel III and IFRS9), and (vi) the completion of the Banking Union.

The main factors for the subdued profitability of significant banks in the Banking Union

09-12-2019

Most significant institutions in the euro area generate returns below the risk-adjusted rate required by investors. This paper surveys some recent studies on the causes of this low profitability, and then discusses several actions that the SSM may want to undertake, to support banks in their quest for higher returns.

Most significant institutions in the euro area generate returns below the risk-adjusted rate required by investors. This paper surveys some recent studies on the causes of this low profitability, and then discusses several actions that the SSM may want to undertake, to support banks in their quest for higher returns.

Údar seachtarach

A. Resti

Main factors for the subdued profitability of significant banks in the Banking Union

09-12-2019

There is no “one-size-fits-all” strategy to achieve viable profitability, but all banks need good strategic steering and risk management capabilities to adjust their business mix to changes in the operating environment. Banks have already taken actions to enhance profitability and the room of manoeuvre for the future is not that ample. Policy makers can take further initiatives to fix structural inefficiencies and provide better conditions for banks to enhance profitability. These concerted actions ...

There is no “one-size-fits-all” strategy to achieve viable profitability, but all banks need good strategic steering and risk management capabilities to adjust their business mix to changes in the operating environment. Banks have already taken actions to enhance profitability and the room of manoeuvre for the future is not that ample. Policy makers can take further initiatives to fix structural inefficiencies and provide better conditions for banks to enhance profitability. These concerted actions would help reduce the gap between banks’ RoE and cost-of-equity.

Údar seachtarach

B.Bruno, E.Carletti, EUI

Main factors for the subdued profitability of significant banks in the Banking Union

09-12-2019

In this paper we argue that the own findings of the SSM THEMATIC REVIEW ON PROFITABILITY AND BUSINESS MODEL and the academic literature on bank profitability do not provide support for the business model approach of supervisory guidance. We discuss in the paper several reasons why the regulator should stay away from intervening in management practices. We conclude that by taking the role of a coach instead of a referee, the supervisor generates a hazard for financial stability.

In this paper we argue that the own findings of the SSM THEMATIC REVIEW ON PROFITABILITY AND BUSINESS MODEL and the academic literature on bank profitability do not provide support for the business model approach of supervisory guidance. We discuss in the paper several reasons why the regulator should stay away from intervening in management practices. We conclude that by taking the role of a coach instead of a referee, the supervisor generates a hazard for financial stability.

Údar seachtarach

T.Farina, J-P.Krahnen, L.Pelizzon, M.Wahrenburg

Main factors for the subdued profitability of significant banks in the Banking Union

05-12-2019

This paper examines how the ECB should respond to the currently low profitability of significant banks in the Banking Union. The subdued profitability appears to be a structural problem caused by overbanking, with too many bank assets chasing too few profitable banking sector opportunities. To address the root problem of overbanking, the ECB should use its existing supervisory powers to require significant banks with unsustainably low profitability to restructure reducing their overall size. This ...

This paper examines how the ECB should respond to the currently low profitability of significant banks in the Banking Union. The subdued profitability appears to be a structural problem caused by overbanking, with too many bank assets chasing too few profitable banking sector opportunities. To address the root problem of overbanking, the ECB should use its existing supervisory powers to require significant banks with unsustainably low profitability to restructure reducing their overall size. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.

Údar seachtarach

Ata Can Bertay, Harry Huizinga

Impediments to resolvability of Banks

29-11-2019

This paper gives an overview of the seven aspects of resolvability defined in 2019 by the Single Resolution Board, and then assesses progress in two key areas, based on evidence gathered from public disclosures made by the 20 largest euro-area banks. The largest banks have made good progress in raising bail-in capital. Changes to banks’ legal and operational structures that will facilitate resolution will take more time. Greater transparency would make it easier to achieve the policy objective of ...

This paper gives an overview of the seven aspects of resolvability defined in 2019 by the Single Resolution Board, and then assesses progress in two key areas, based on evidence gathered from public disclosures made by the 20 largest euro-area banks. The largest banks have made good progress in raising bail-in capital. Changes to banks’ legal and operational structures that will facilitate resolution will take more time. Greater transparency would make it easier to achieve the policy objective of making banks resolvable.This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.

Údar seachtarach

Alexander Lehmann

Impediments to resolvability of banks?

21-11-2019

The feasibility and credibility of bank resolutions depends, among others, on whether the impediments to resolvability are addressed or removed. Based on the limited public information available, this paper assesses the current state of the identification and removal of impediments to the resolvability of banks under the remit of the Single Resolution Board (SRB). The main findings suggest that the inclusion of the impediments assessment is taking the SRB more time than originally foreseen, there ...

The feasibility and credibility of bank resolutions depends, among others, on whether the impediments to resolvability are addressed or removed. Based on the limited public information available, this paper assesses the current state of the identification and removal of impediments to the resolvability of banks under the remit of the Single Resolution Board (SRB). The main findings suggest that the inclusion of the impediments assessment is taking the SRB more time than originally foreseen, there is a greater dependence on banks to address or remove impediments and that the non-resolvable banks are not notified to the EBA.

Údar seachtarach

W.P. DE GROEN

European Stability Mechanism – Main Features, Instruments and Accountability

11-10-2019

This document presents the main features of the European Stability Mechanism (ESM), including governance, capital structure and funding sources, main lending instruments, as well as its oversight and accountability framework. It also reviews recent proposals and contributions on the possible evolution of the ESM. This note is regularly updated.

This document presents the main features of the European Stability Mechanism (ESM), including governance, capital structure and funding sources, main lending instruments, as well as its oversight and accountability framework. It also reviews recent proposals and contributions on the possible evolution of the ESM. This note is regularly updated.

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Decarbonising European industry: hydrogen and other solutions (online event)
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Hearing on Transport of live animals in third countries
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ANIT
01-03-2021
Exchange of views with HR/VP Josep Borrell
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