From a debt crisis towards a
more efficient and integrated
European financial market, under
a new supervisory regime
Pedro Duarte Neves • Vice-Governor
Cascais, 15 October 2015
Annual Convention of the European
Leasing and Consumer Credit Industries
1. High debt and (not much) deleveraging
2. Consumer credit and leasing: recent trends
3. The European legal and regulatory framework:
key ongoing initiatives
4. Looking ahead
2•
15 October 2015
1. High debt and (not much) deleveraging
Some stylised facts on high levels of indebtedness
•
Many credit booms have been followed by either economic
underperformance or a financial crisis
[Dell’Ariccia, et all (2012), IMF]
•
High debt can be a drag on economic growth
[Ceccetti, et all (2011), BIS]
•
High levels of public debt tend to exacerbate the effects of private sector
deleveraging after a crisis
[Jordà & Schularick (2013), Federal Reserve Bank of San Francisco]
6•
15 October 2015
1. High debt and (not much) deleveraging
2. Consumer credit and leasing: recent trends
3. The European legal and regulatory framework:
key ongoing initiatives
4. Looking ahead
7•
15 October 2015
1. High debt and (not much) deleveraging
2. Consumer credit and leasing: recent trends
3. The European legal and regulatory framework:
key ongoing initiatives
4. Looking ahead
10 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Microprudential framework
Single rulebook
•
CRD IV/CRR sets the primary regulatory framework
•
The EBA prepares regulatory and implementing technical standards, as well
as guidelines within the scope of the CRR/CRD IV (which covers all types of
credit granted by credit institutions). Some examples are:
• RTS on IRB assessment methodology
• Discussion Paper on the Future of the IRB Approach
• Guidelines on default definition (EBA presentation tomorrow)
•
The single rulebook is vital for the internal market and for the functioning
of the Single Supervisory Mechanism (presentation tomorrow on the
impact of the SSM for specialised lending institutions)
11 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Microprudential framework
Impact assessment of the implementation of CRR/CRD
The European Commission conducted a consultation on the possible impact
of the CRR and CRD IV on bank financing of the economy (consultation
period ended 07 October 2015)
Some issues of interest
•
Lending to corporates
•
Lending to SMEs
•
Proportionality
•
Complexity of the regulatory framework
This is a process of ex-post impact assessment of regulation.
12 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Macroprudential framework
Macroprudential policy
Aims to contribute to the prevention or mitigation of systemic risks to
financial stability that arise from developments within the financial system,
taking into account macro-economic developments, so as to avoid periods
of widespread financial distress, and thereby ensuring a sustainable
contribution of the financial sector to economic growth.
The development of analytical tools to detect potential systemic risks is
crucial for macroprudential policy.
13 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Macroprudential framework
Work of the ESRB
•
•
Expressed concerns over excessive private and public debt levels in its
regular risk assessment
•
«the General Board discussed the need to monitor medium-term
risks related to public and private debt sustainability.», ESRB GB
press release, 24 September 2015
•
«An economy-wide debt overhang therefore has profound
macroeconomic and macro-financial implications in an environment
of very low nominal growth.», ESRB annual report 2014
Report on misconduct risk in the banking sector (June 2015)
14 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Conduct supervision
Mandate of the authorities
To be effective, conduct supervision should have a clear and comprehensive
mandate including:
• Rule-making powers
• Oversight
• Complaints handling
• Enforcement
• Financial information
However, supervisory institutional arrangements to monitor and address
conduct issues differ greatly among EU countries
16 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Conduct supervision
EBA work on consumer protection: main strategic areas in credit markets
Product oversight and governance aimed at ensuring that the interests,
objectives and characteristics of consumers are taken into account when retail
banking products are designed and brought to market
Responsible lending aimed at ensuring that creditors assess consumers’
creditworthiness and product suitability before concluding credit agreements
Treatment of borrowers in arrears aimed at ensuring that creditors implement
measures which attempt to resolve with the borrower any payment difficulties
before initiating foreclosure proceedings
Remuneration aimed at ensuring that creditors implement robust remuneration
policies that will improve links between incentives and the fair treatment of
consumers, and reduce the level of risk and potential for misselling
17 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Conduct supervision
Work of the Joint Committee (JC) of the European Supervisory
Authorities on conduct risks
In its March 2015 Risk Report, the JC Risk Sub Committee recommended:
• Strengthening product oversight and corporate governance controls
- External audits to the corporate governance systems
• Improving the regulatory framework applicable to conduct risks
- Key areas: sales incentives, product oversight and governance
arrangements
• Improving supervisory practices to address conduct risks
- Inclusion of conduct risk in stress testing exercises; develop supervisory
benchmarks for conduct risk; ensuring factoring of conduct risk in
banks’ ICAAPs
- Mystery shopping inspections; whistle-blowing; forensic auditing
exercises
18 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Financial literacy
Financial literacy as a complement of banking conduct supervision
• Focusing on retail banking markets’ supply and demand
• Promoting financial literacy as a complement to regulation, oversight and enforcement
Strategic role of financial literacy
• Appropriate decision-making by consumers promotes market efficiency and
contributes to financial stability and economic growth
• Consumer are more capable of selecting loans that are more adjusted to their financial
capability (responsible borrowing)
The involvement of National Supervisors in financial literacy
• Conducting surveys on the financial literacy of the population
• Leadership of National Strategies for Financial Education
• Implementing financial information and education initiatives
19 • 15 October 2015
3. The European legal and regulatory
framework: key ongoing initiatives
Financial literacy
Surveys on financial literacy
•
Surveys measure financial knowledge and behaviours, allow for a diagnosis of
needs and facilitate setting priorities for financial education
•
In Portugal and in other European countries (e.g. United Kingdom, Germany,
Ireland, Finland, Norway, Czech Republic)
National Strategies for Financial Education (NSFE)
•
NSFE are lead by public authorities but join efforts of many stakeholders, promoting
efficiency in financial education delivery
•
In Portugal: since 2011, with the other two financial supervisors, and priority was
given to the development of a website Todos Contam (www.todoscontam.pt),
financial education in schools in partnership with the Ministry of Education and
Science, financial education for micro and small firms in partnership with the
Ministry of Economy
•
In other countries: e.g. Spain, Netherlands, United Kingdom, Ireland, Czech Republic
20 • 15 October 2015
1. High debt and (not much) deleveraging
2. Consumer credit and leasing: recent trends
3. The European legal and regulatory framework:
key ongoing initiatives
4. Looking ahead
21 • 15 October 2015
4. Looking ahead
Looking ahead…
• Completion of the Banking Union
• A more active macroprudential supervision
• Strengthening of conduct supervision
• Development of a Capital Markets Union
In September 2015, the European Commission released an Action Plan on
Building a Capital Markets Union
• Challenges regarding EU Financial Services Regulation
In August 2015, the European Parliament released a draft report on
stocktaking and challenges of the EU Financial Services Regulation
22 • 15 October 2015
From a debt crisis towards a
more efficient and integrated
European financial market, under
a new supervisory regime
Pedro Duarte Neves • Vice-Governor
Cascais, 15 October 2015
Annual Convention of the European
Leasing and Consumer Credit Industries