Conference: The Banking Union and the Creation of Duties - Department of Law, Robert Schuman Centre for Advanced Studies, European University Institute By: Stefano Cappiello, Head of Resolution Unit, EBA

1. The EBA and the Banking Union
Stefano Cappiello
Head of Resolution Unit
Firenze, 19 March 2015

2. 22
Outline
1. The EBA and the Banking Union (BU)
2. The tools of the EBA
3. The EBA and the SSM
4. The EBA and the SRM
5. The way forward

3. 333
1. The crisis and the establishment of the EBA
3
• The “first wave” (2008/2009) of the crisis showed the weakness of the Single
Market for banking services built on the principle of “minimum harmonization”
and “mutual recognition”
lack of truly common rules across the Union led to: regulatory arbitrage with spill
over effects (eg national definitions of loss absorbing capital instruments);
different reporting systems (eg NPL) which weakened market discipline and
cross-border supervision; obstacles and unnecessary duplications and burdens
for the operations of cross-border groups
• From minimum harmonization to maximum harmonization (the Single Rulebook)
• The EBA to build the Single Rulebook (SR) and to ensure its consistent
application across the Union

4. 44
1. The BU and the impact on EBA
4
• The “second wave” of the crisis (2011): the lack of a European safety net and
coordination for cross-border resolution triggered the vicious circle between sovereigns
and banks, and ring fencing between Member States
• Harmonization is necessary but not sufficient: it has to be accompanied by integration
of supervision (SSM) and resolution (SRM)
• Does the role of the EBA change ?
• The SR is fundamental for the smooth functioning of the SSM and the SRM,
otherwise national rules would hamper the conduction of common supervision and
common resolution
• The SR is fundamental to avoid a fragmentation of the Single Market between BU-
States and non-BU-States

5. 55
The EBA and the roles with respect to BU and nonBU
EBA Single rulebook - EU28
SSM SRM
CRR/CRD IV (Basel III) BRRD/Deposit Guarantee Scheme
Non BU
authorities
EBA
coordination-
convergence

6. 66
2. The regulatory tools of the EBA
 The EBA draft technical standards:
• TS specifying directives: what implications ?
• due process: public consultation, endorsement of the
Commission, and claw-back of the Parliament
• scope of the mandates: the (blurred) line between
“policy/strategic choices” and “technical choices”,
 The EBA guidelines and recommendations: “comply or explain” and
implications for the binding effect
 The other “soft law” tools: the Q&A tool; the advices and opinions to
the European institutions
 The breach of law procedure

7. 77
EBA
7
Product Type 2011 2012 2013 2014 2015*
Guidelines 2 6 2 17 16
Implementing Technical Standards 21 10 8
Regulatory Technical Standards 1 39 22 26
Opinion 1 6 5 14 26
Report 6 12 26 23 25
*expected
The Interactive Single Rulebook on the EBA website to facilitate integrated
access to L1 and L2 rules, GL, QandAs

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2. The convergence tools of the EBA
 Promoting consistent and convergent supervisory practices across
the Union (same rules need to be applied in the same way)
The tools: recommendations; Europe-wide stress-test; peer reviews;
thematic studies (e.g. on RWAs); Single Supervisory Handbook
 Promoting cooperation and coordinated decisions between “home”
and “host” authorities for cross-border groups
The tools: participation to colleges to facilitate “joint decisions” between
home and host authorities, and possibility to carry out binding/non binding
mediation when disagreement occurs. The differences between mediation
and breach of law procedure

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3. The work of EBA on prudential regulation (and the SSM)
 In the first years the EBA focused on the harmonization of the “own
funds” definitions, on the creation of a single reporting system for all
banks (COREP and FINREP) and the harmonization of the key
definitions for reporting (NPL, asset encumbrance, forebearance)
 From the numerator to the denominator: EBA action has now
expanded on the banks’ models to measure market and credit risks
(reports, TS, GL)
 National discretions/options allowed by the CRD/CRR are a source
of concern. Transitional versus permanent options. The importance
of the issue for the SSM. The monitoring carried out by the EBA

10. 1010
3. The work of EBA to build the new resolution regime (and
the SRM)
 40+ TS and GL stemming from the BRRD and DGSD, and a number
of advices for the Commission
 The room for national discretions allowed by the BRRD as a concern
for cross-border resolution, even within the SRM
 Beyond regulation: EBA to participate to resolution colleges, mediate
for joint decisions on cross-border resolution plans, carry out
benchmarking and simulation exercises

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4. The way forward
 BU as a driver to strengthen the SR, both in supervision and
resolution
 Expanding the SR to other areas such as corporate law and
insolvency law ?
 EBA’s tools: has the time come to fine tune some of them (e.g. the
scope of the TS, or the mediation ?)
 The BU calls for a revision of the EBA’s governance bodies ?

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THANK YOU !
Stefano Cappiello
EBA
Resolution Unit
stefano.cappiello@eba.europa.eu
European Banking Authority
Tel +44 (0)20 7382 1770
Fax +44 (0)20 7382 1771
info@eba.europa.eu
www.eba.europa.eu