TOWARDS THE EUROPEAN BANKING UNION:
KEY CHALLENGES AND IMPLICATIONS
December 2014
Angelo Federico Arcelli
Partner, Oliver Wyman
FINANCIAL SERVICES
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Following the CA, prudential supervision responsibilities will be transferred to
the ECB and resolution responsibilities to the SRB
Q4 2014
Comprehensive
Assessment
results and
follow-up
Entry in force
of Single
Supervisory
Mechanism
Entry in force
of Single
Resolution
Mechanism
© Oliver Wyman
1H 2015
2H 2015
26 Oct
9 Nov
May 2015
August 2015
Results
publication
Banks to
present
capital plans
to ECB
6 months timeline to
cover capital shortfall
from AQR or baseline
scenario
9 months timeline to
cover capital shortfall
from adverse scenario
4 November
ECB assumes its new
prudential supervision
responsibilities
1st January 2015
1st January 2016
Entry in force of the Single resolution
mechanism: Single Resolution Board
becomes responsible for SSM Banks resolution
planning and managing the resolution of
institutions in serious difficulties
Entry in force of Single Resolution Fund
that will pool resolution funds of single
countries and provide funding to enable the
bank to continue operating while it is being
restructured
2
The ECB supervises more assets and more global systemically important
institutions than any other regulator
Bank Assets under supervision, € TN
Eurozone
Eurozone
(ECB)
(ECB)
25.1
China
China
(CBRC)
(CBRC)
US US
(FED,FDIC,...)
FDIC,...)
(FED,
UKUK
(PRA)
(PRA)
Japan
Japan
(FSA)
(FSA)
4.5
9
2
13.2
8
10.7
4
9.3
3
6.4
Direct supervision
# of G-SIFI 1
Details on institutions
supervised by ECB
• Direct supervision of:
– 120 Banking Groups2
– Located in 19 countries
– Corresponding to 1,258
Legal Entities – some of
which located outside of
the Eurozone
• Through the indirect
supervision mechanism,
the ECB supervises
additional 3,500
institutions
Indirect supervision
Source: ECB; EBA credit register; 1. Global systemically important financial institutions as per FSB definition; 2. ECB direct supervision perimeter does not match exactly with the preliminary
institutions selection subject to Comprehensive assessment
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3
We expect three forms of response to the Comprehensive Assessment from
the Financial Services industry
1
2
3
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Strategic and tactical reshaping
• Capital raising as a result of both the CA and other concurrent regulatory developments
(eligibility of capital instruments for fully loaded Basel III capital ratios)
• Consolidation and divestments, especially in the most affected countries
• Recognition of the results of CA in underwriting standards, provisioning, pricing (assets
and liabilities) and capital allocation
Capabilities upgrade
• Scenario planning and enhanced stress testing capabilities
• RWA calculation upgrades
• NPL management
• Upgrade to data infrastructure and management
Regulatory interface
• SSM – banks will need to respond to the different (and in many cases more onerous)
demands of the joint supervisory team
• National regulators – creation of two-layered regulatory system likely to increase
regulatory focus on topics such as conduct risk
4
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