1 Introduction to EU Banking Directives Laszlo Butt DG Internal Market and Financial Services Banking & Financial Conglomerates Unit

2 Banking Directives Capital Requirements Directive (CRD) Deposit Guarantee Scheme (DGS) Financial Conglomerates Directive (FCD) Winding up Directive (WuD) Bank account and Branch Account Directive

3 Capital Requirements Directive (CRD) 2006/48/EC –Banking Codified Directive –licensing and supervision of CREDIT INSTITUTIONS –capital requirements for credit and operational risk 2006/49/EC –Capital Adequacy Directive –capital requirements for INVESTMENT FIRMS –capital requirements for market risk

4 Basel II – Three Pillars Regulatory Minimum Capital Supervisory Review Market Discipline

5 Pillar 1 – Risks and the “continuum of approaches” Regulatory Minimum Capital Credit Risk Standardised Approach Internal Ratings Based Approach Market Risk Standardised Approach Internal Models Operational Risk Basic Indicator Approach Standardised Approach Advanced Measurement Appr. Requirements apply to banks of different size and complexity more sophisticated approaches come with moderate capital incentives Securiti- sations

6 What more: Licensing Passporting Third countries Large exposures Supervision and disclosure by competent authorities

7 May 2009  Adoption of the 1 st set of amendments to the CRD by the European Parliament and the Council July 2009 CRD III  2 nd set of amendments to the CRD (trading book, re-securitisation and remuneration) adopted by the COM 2010 CRD IV  3 rd set of amendments to the CRD (supplementary measures, dynamic capital provisioning and options and discretions) to be adopted by the COM January 2011  1 st set of amendments to the CRD have to be implemented Not to scale October 2008 CRD II  1 st set of amendments to the CRD (securitisation, large exposures, supervisory amendments, hybrids, liquidity risk) adopted by the COM Recent changes to the CRD Latestamendments Further amendments

8 Deposit Guarantee Scheme (DGS, 94/19/EC) Twin objectives: Protection of Depositors’ wealth Maintenance of confidence in the EU banking system through protection of stability – avoiding a run on the banks

9 DGS – Key provisions Member States have to ensure one or more officially recognised DGS All deposit-taking credit institutions must join DGS –No exception –Only alternative: equivalent institutional protection scheme (mutual guarantee scheme) recognized under national law

10 DGS – Key provisions Credit institutions must make available information about DGS arrangements to (potential) depositors NEW Rules: Minimum coverage level set at €50,000 Obligation on DGS to pay claims within 4-6 weeks from triggering event

11 DGS - Cross Border Aspects Home country DGS pays for depositors at EU branches Art. 4 par. 2 and Annex II Dir. 94/19/EC –Branch may join host state scheme, if higher level and/or wider scope of cover than home state scheme –Host state scheme grants supplementary cover only –Arrangement necessary between home and host DGS

12 Recent upgrade of the Deposit Guarantee Scheme (DGS) Directive 2009/14/EC was adopted on 11 March 2009 and amended Directive 94/19/EC: –raised coverage level from € 20,000 to € 50,000 and € 100,000 by end 2010 –abandoned 10% co-insurance –reduced payout delay from 3-9 months to 4-6 weeks The Commission obliged to prepare a review report (and, if necessary, legislative proposals) by end-2009

13 Review of the DGS Coverage level (EUR ?) and scope (eligibility criteria?) Payout Delay (1 week?) and Modalities (set off?) Financing of DGS (ex-ante with a maximum level?) Depositor information (template?) Cross border cooperation (Role of host DGS?) Mandate (pay-out box or European FDIC?) Structure (Pan EU DGS?) Issues under examination:

14 Financial Conglomerates Directive (2002/87/EC ) CCC: contagion, complexity, concentration Supplementary supervision on consolidated level, monitoring risk- concentration, intra group transfers, capital Coordinator for cross sector & cross border cooperation

15 Reorganisation and winding-up of credit institutions (Directive 2001/24) Objectives are to ensure universality in the winding up and reorganisation of credit institutions with branches in other countries mutual recognition of measures and proceedings cooperation of authorities NOT aims at harmonising national insolvency legislation

16 WuD - Key provisions Key provisions Home country principle in applicable law and competence of authorities Communication requirement between authorities involved Notification of all, including cross border creditors Equal rights and treatment for creditors regardless of the country of origin (pari passu)

17 Bank Account Directive (86/635/EEC) The objective of this Directive is to harmonise the format and contents of the annual accounts of all financial institutions within the EU.

18 Branch account (89/117/EEC) The Directive removes the need for branches of foreign banks and other financial institutions having their head office in another Member State or in a non-member country to publish separate annual accounts.

19 Recent proposal to upgrade the supervisory architecture Macro-supervision: no single body in Europe responsible for systemic risk monitoring (macro-prudential supervision) Micro-supervision: –No means of overcoming divergences in colleges of supervisors; –Diverging technical standards between Member States (no harmonised rulebook); –No co-ordination of crisis interventions. Insufficient heeding of risk warnings

20 Two pillars of new supervisory structure European Systemic Risk Council (ESRC); and European System of Financial Supervisors (ESFS).

21 Thank you for your attention index_en.htm