Start Date: 05/07/2005 | Deadline: 28/10/2005
1. This paper explains CEBS' overall approach to meeting its main aims and objectives, as well as the tools at its disposal to fulfil these, taking stock of the experience gained over the first year of its existence, and looking ahead at how CEBS intends to address near-term challenges.
2. Internationalisation, consolidation and the centralisation of key business functions are the main market trends affecting the environment in which CEBS started operating. On the other hand, the majority of the 8,000 credit institutions in the EU are operating on a national, or even local, scale. The market trends create a misalignment between legal and operational structures of cross-border groups and present several challenges to the smooth functioning of a decentralised supervisory framework and to the operational implementation of the concepts contained within the banking directives. The existing diversity in markets suggests that the EU does not have an overarching need to strive for full regulatory uniformity in the banking field, although local rules should not disrupt progress towards convergence of supervisory practices or unbalance the EU-wide level playing field.
3. The committee considers that its main objectives, when carrying out its tasks, are to promote cross-border supervisory co-operation and the safety and soundness of the European financial system in an effective and efficient way, through
(i) encouraging good supervisory practices, to be implemented in a convergent and consistent manner;
(ii) promoting an efficient approach to supervision, which avoids unnecessary duplication of tasks;
(iii) contributing to effective legislation, through sound technical advice, open consultations and convergence in practices; and
(iv) working towards a level playing field across the EU, by adopting approaches that are proportionate to the nature, scale and complexity of the business of supervised entities and paying attention to the regulatory burden.
CEBS' activities to promote stability and sound risk management practices are also expected to bring benefits for consumers and end-users of financial services. CEBS will carry out its tasks in a way that ensures it meets its obligations on consultation, accountability and transparency. As the boundaries between financial sectors are becoming less marked, great attention will be paid to cross-sectoral aspects, intensifying the dialogue and the co-operation with the other Level 3 committees, CESR and CEIOPS.
4. This paper elaborates on how the performance of the three tasks assigned to CEBS can contribute to the fulfilment of its objectives, and discusses the tools that are being used in carrying out these tasks.
Contributing to effective EU legislation:
CEBS' role and capacity to act in this area will be mainly determined by requests from the European Commission. In order to ensure that proper use is made of the possibilities provided by the Lamfalussy approach, it is important that CEBS' mandates from the Commission are drafted sufficiently widely to give scope for advice on substantive issues rather than simply information-gathering. As the bulk of Community legislation in banking is not framed within the Lamfalussy approach and lacks therefore a clear distinction between framework principles and technical details, CEBS proposes that a distinction is made in practice between mandates on more general, political issues, for which the Commission and the European Banking Committee should play a pivotal role, and those dealing with technical issues, which should give CEBS the appropriate scope to develop detailed proposals.
Promoting a consistent approach to banking supervision:
In order to facilitate an integrated banking market, it is important to avoid unnecessary inconsistencies in national implementation and in supervisory practices, while respecting the need for flexibility and supervisory judgement and respecting local diversity. This is a key task for CEBS, which will be carried out through tools promoting convergence in practices, developing common frameworks for supervisory reporting, disclosure of choices made in national implementation and supervisory practices, and fostering the emergence of a common supervisory culture via training and staff exchange initiatives. CEBS has already made significant progress in this area, in particular exploiting the opportunities presented by the future capital requirements regime. Although not legal instruments, CEBS' guidelines and standards carry a good deal of weight, as they are developed by supervisors and are based on consensus. They should be seen as a reference point for all supervisory authorities. Supervisory authorities are expected to achieve a greater degree of commonality in supervisory practices, beyond the minimum set in the directives.
Cooperation and information-sharing between banking supervisors: There are various tools that CEBS will use to achieve its goals in this area, including developing ex ante guidelines and ex post review mechanisms, facilitating regular information exchange, creating ad hoc information-sharing networks, and developing effective operational network mechanisms. CEBS' efforts will first focus on ex ante shaping of the co-operation framework and will then turn to the practical use of the frameworks for specific cases, later reviewing how this is working in practice.
5. The Lamfalussy framework provides CEBS with a flexible and adaptable framework within which it can deliver its objectives. CEBS will aim to exploit fully the tools at its disposal. There is an ongoing debate about possible additional tools for the level 3 committees, and work is underway in other committees on elements such as peer review and mediation. CEBS does not currently perceive a pressing need to develop further tools to promote its objectives, but it remains open to discussing whether it is appropriate to go further.
6. CEBS plans to have an annual review to reassess its work programme and - if necessary - to adapt its strategy and objectives. CEBS will develop a methodology to help to assess the progress and impact of its work. Given the complexity of the operating environment, the number of interested parties, and resource constraints, CEBS must be able and willing to adapt its priorities and flexible enough to adapt to changing needs.
7. The paper has three main parts: an overview of the framework within which CEBS operates, and the various market trends that impact on it; the objectives, tasks and tools of the Committee; and a preliminary view on how CEBS' progress towards its objectives can be evaluated and assessed. The annex explains in detail how the various tools are currently being used. Request for comments
8. CEBS would welcome views on how well it is focussed on delivery, how it can better align its work to the wider needs of its various constituents, and what improvements it could make at this stage to prepare for the assessment of the Lamfalussy structures in a few years time. Specifically, CEBS would welcome feedback during the public consultation of this paper on the questions highlighted in the boxes.
9. The consultation period will be four months: the usual three months and an additional month because the summer months make up part of the consultation period. Comments should be submitted by Friday 28 October 2005 to CP08@c-ebs.org.
10. Comments will be published on CEBS' website (unless a respondent requests otherwise). After the consultation is closed an explanation will be published of how the major points raised were addressed.