Last week, the EBA and the ECB published some thoughts on next steps in bank supervision. These did not attract a lot of media attention. However, in light of changes to come, I thought it be interesting to take a closer look.
I told you so. Initially, CRD IV and CRR were meant to enter into force in 2013. However, the European democratic process led to a full year delay, a year during which EU member states added many tweaks to help their own banks.
The effects of the complexity could have been predicted all along: today, the rules are so complex that they undermine the authority of the authorities: Germany acts disobediently by writing its own bank recovery rules in an attempt to help banks that may have to apply these rules in the near future: Deutsche Bank and some almost insolvent Landesbanken.
So harmonise. The ECB has been working on harmonising the rules since April this year, as the interview with Ignazio Angeloni, member of the ECB Supervisory Board, shows (possibly earlier, given that the AQR revealed many inconsistencies of the rules.)
The result of ECB’s efforts is a list of 160 options and discretions in the CRD IV and CRR.
Do as I say, don’t do as I do. But in managing these options and discretions, the ECB too goes it alone. Angloni shows that only on 40 options that are difficult to harmonise (because they are controlled by national authorities) the ECB has spoken to the European Commission and the European Banking Authority. The other 120 are sorted out by the ECB with little interference of important constituents and stake holders.
On the double! The ECB now has a comprehensive harmonisation plan that is meant to enter into force by soon. Worryingly, the ECB sees important parts of the regulatory process e.g. consultation as a formality:
Ho, ho, not so fast! Andrea Enria, EBA’s chair, does not like it and sees his hand being forced. “I believe that the Banking Union is injecting a sense of urgency in this debate on the appropriate level of harmonisation in the Union.”
Enria uses his speech to call for due process, on which the EBA traditionally relies “it is well understood that such allocation of independent regulatory competence to the EBA should go hand in hand with strong transparency and accountability in the rule-making proces”.
Enria then points out that the ECB cannot fully harmonise bank rules, because it has no control over banks outside the euro-zone, e.g, the UK.
True, EBA’s strategy of transparency and accountability helped it survive, it contributed to its success. And Enria is right: only the EBA can do the full harmonisation dance properly.
However, I am not sure if this strategy will help it battle the ECB. Bank supervision will likely improve once the ECB completes its harmonisation plan. As all supervisors struggle with national options and discretions, it is naïve to think that non-Euro country supervisors will not follow the ECB and not copy its policies.