The European Banking Authority’s (EBA)
three-year plan to harmonise banking regulation across the
member states is likely to be hampered by limited resources and
an unending wave of further legislation.
The EBA’s role is, fundamentally, to provide
technical expertise and to develop a set of unified rules that
are applicable across the EU in a consistent manner. Its work
so far on the Single Rulebook will be built upon, as the
authority looks to ensure supervisors apply these rules
consistently across the EU.
Plans within its
2016 work programme include, for example, on AT1 issuances:
'to work on standardised term sheets’ (Activity 1)
and 'to provide consistent implementation across the EU of the
provisions of resolution policy documents’
"The challenge with harmonising EU markets has always been
how it interacts with local legislation," said Simon Ovenden, a
Cleary Gottlieb Steen & Hamilton in London.
"There’s this great idea of a harmonised market,
but for example, how can we have that in the absence of a
uniform insolvency regime?"
- In its latest work programme the EBA has outlined
plans to, over the next three years, ensure a harmonised
approach to banking regulation across the member
- Directives prove particularly difficult to
achieve harmonisation as the idea is that countries are free
to implement through national law;
- But discrepancies create risks, especially for
pan-European institutions. For a union to work there has to
If rules are introduced as a directive – as opposed
to a regulation – there will always be discrepancies
between how 28 member states interpret the rules and implement
them through their own national legal system.
Just last week the European Commission (EC) referred
six member states to the European Court of Justice (ECJ)
for failing to fully implement the Bank Recovery and Resolution
The Czech Republic, Luxembourg, the Netherlands, Poland,
Romania and Sweden received a warning back in May but are still
yet to adopt the new rules in a way the Commission deems
sufficient. EU countries had until December 2014 to convert the
directive into national law.
Failing to implement legislation is a breach of EU law. But
it’s unlikely that institutions – or in
this case, the government – are looking for ways to
bypass the directive.
"On the whole the industry would prefer the same rules to be
applied consistently across Europe," said Karen Anderson, a
Herbert Smith Freehills. "Where different national
authorities take different views on how it should be done, that
creates potential risks."
"Achieving a more uniform and flexible regulatory framework
reflects the need for the integrity of the EU single market as
a whole, as well as for the smooth functioning of the banking
union," said an EBA spokesperson when contacted.
"The challenge with
harmonising EU markets has always been how it interacts
with local legislation"
Some have called into question the EBA’s
resources and legal authority to even carry out such work.
Budget cuts at EU level have impacted resources, agreed the
spokesperson, but "we remain confident that the added value we
are bringing…is far from going unnoticed", he added.
There is also some way to go for many initiatives. Solvency
II is set to come in early 2016, Basel III has a deadline of
2019 and plans for the Europe-wide structural reform –
which, although not yet agreed on, appears to be a
certainty– has hardly even started.
"Once the wave of post-crisis regulation subsides I think
we’ll see the EBA moving more towards its
harmonisation and mediation roles," said Anderson. "But for now
there’s still a few more standard-setting pieces
to get through."
And with various authorities at both national and EU level
– which appear to be working towards the same goal,
but have varying methods and abilities to get there –
navigating the web of regulation and who enforces it is only
set to get harder.
"It’s a complicated, three-dimensional jigsaw
with initiatives coming from all over, that all have very
different impacts on different pieces of legislation. And
it’s only going to continue over the coming
years," said Ovenden.
The Capital Markets Union (CMU) is one initiative looking to
address this. As part of its long-awaited action plan released
earlier this month it will review the cumulative impact of
post-crisis regulation on banks and financial markets; a move
the industry has welcomed.
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