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S u m m a r y o f t h e E B A 2 0 1 2 a n n u a l r e p o r t
5
Preventing regulatory
arbitrage
The EBA consultation which received the most
responses in 2012 was that on the subject of
closing loopholes in regulations relating to
uncleared derivative transactions. The discus-
sion paper received more than 70 responses
from banks, corporates, insurance companies
and supervisors.
Together, the three European supervisory au-
thorities (ESAs) plan to finalise the technical
standards on margin requirements for un-
cleared OTC derivatives as soon as the inter-
national principles become available. Produ­
cing technical standards in this area remai­ns
one of the main EBA priorities for 2013.
Guarding against future
shocks
Recovery and resolution plans are a key plank
of efforts designed to ensure financial institu-
tions have plans in place to cope with a poten-
tial financial shock which could threaten their
existence. The EBA has a key role to play in
coordinating effective recovery and resolution
plans and in minimising the systemic impact
of any one institution failing.
In May, the EBA issued a discussion paper
(DP) presenting its preliminary views on the
structure and key elements of the recovery
plans, and a European common template for
drafting recovery plans. This was followed up
in the second half of 2012 by the issuance of
a recommendation from the EBA which was
intended to ensure consistency across the EU
on the development of recovery plans. It re-
quires 39 major EU cross-border banks to de-
velop group recovery plans and have the plans
discussed within the supervisory colleges by
the end of 2013.
The EBA delivered an opinion in December
2012 which attempted to address potential in-
consistencies between a European framework
for resolution and recovery and new initiatives
under way by the Committee on Payment and
Settlement Systems (CPSS), the Technical
Committee of the International Organisation
of Securities Commissions (IOSCO) and the
Financial Stability Board (FSB).
In 2012, the EBA’s work on bank oversight
focused on a number of key areas, includ-
ing: risk assessments; common reporting of
regulatory data; risk-weighted assets (RWAs);
restoring banks’ balance sheets; and the role
of colleges of supervisors in the oversight of
cross-border banking groups.
Recapitalisation exercise
The stability of European financial markets
depends on the ability of market participants
to make clear assessments of the continued
viability and health of banks within the Union.
Following shortly after the stress testing of
2011, the EBA carried out a recapitalisation
exercise which forced national supervisory
authorities to ensure that banks held a suffi-
cient level of high-quality capital to withstand
further deterioration in the economic situ­
ation, after having set up an additional buffer
against sovereign debt risk.
The EBA identified 27 banks that needed to
address a total shortfall of EUR 76 billion by
the end of June 2012, while maintaining lend-
ing to the real economy. By the end of June
2012, the vast majority of banks involved in the
exercise showed a level of Core Tier 1 capi-
tal above the 9 % required. Combining the two
exercises, a total of EUR 250 billion has been
added to banks’ balance sheets as a result of
the EBA’s work.