Early Interventions – which new tools for supervisors? Ádám Farkas Chair Hungarian Financial Supervisory Authority Building a Crisis Management Framework for the Internal Market Brussels, 19 March, 2010

2 Prospective Small, but highly integrated banking market with over 75 % of banking assets held by international banks with their home outside Host country supervisor for a number of SIFI subsidiaries and branches Home country supervisor for two regionally important banks Extensive range of early intervention tools, but weak resolution powers domestically – no formal early intervention framework internationally

3 Some key proposals Strong support for legislation on a common minimum set of early intervention tools applicable throughout the internal market EBA and supervisory colleges to to decide on and implement tools Discretion and flexibility in the timing, selection and use of tools should remain with supervisors Use of pre-defined early warning indicators for international supervisory communication Applicable to all deposit taking banks, but under different rules of international supervisory engagement, and later extended to non-banks But rules of engagement for cross border operations between supervisors to be defined But clearly defined consultation and triggering (escalation) rules between suprvisors for cross border banking groups But the basis for the use of early intervention should not be limited to these indicators

4 Use of Early Intervention Tools EBAHomeHost EU-level SIFI Leading college, power of decision on the use of early intervention tools Implementation of intervention tools at group level Implementation of intervention tools at sub level Cross-border with branches Defined escalation power towards home, notice/info on use of intervention by home Full power of decision on the use of early intervention tools Defined escalation powers towards home, full info sharing on use of early intervention Cross-border with subsidiaries Defined escalation power towards college, dispute resolution notice/info on use of early intervention Leading college, power of decision on the use of early intervention tools Defined escalation powers towards college, local implementation of tools at sub level National-level SIFI Notice/information on use of early intervention Full power of decision on the use of intervention tools N/A Other, smaller No involvementFull power of decision on the use of intervention tools N/A