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E U R O P E A N B A N K I N G A U T H O R I T Y
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3.2. Oversight
3.2.1. Cornerstones of the EBA’s bank
oversight work in 2012
In 2012, the EBA’s work on bank oversight fo-
cused on the following activities: undertaking
risk assessments; promoting the collection,
organisation and common reporting of regu-
latory data; investigating risk-weighted as-
sets (RWAs) discrepancies; ensuring the effi-
cient functioning of colleges of supervisors as
part of the effective oversight of cross-border
banking groups; and concluding the work on
the EBA recommendation on the capitalisa-
tion of banks.
The EBA prioritised developments in its risk
analysis framework to facilitate oversight
such as its system-wide and firm-specific
risk dashboard whilst also continuing efforts
to strengthen the European banking system,
which in fact saw banks strengthening their
capital position by over EUR 115 billion in fresh
capital in the first half of 2012 in response to
meeting the requirement of the EBA recom-
mendation for 9 % Core Tier 1 capital. The EBA
also progressed on the substantial policy work
aimed at strengthening the colleges of super­
visors and increasing consistency of their
functioning through the developing series of
technical standards to be finalised in 2013
with a focus on developing crisis management
preparedness.
The EBA’s oversight work remains categorised
under two specific functions: (i) risk analysis,
which involves the monitoring, assessment,
analysis and reporting of risks and vulnerabili-
ties in the EU banking sector; and (ii) oversight
of colleges, which involves ensuring effective
and efficient cooperation between national su-
pervisory authorities in banking supervision,
through both policy work and active participa-
tion in the colleges of supervisors. Below, we
look at the work undertaken in 2012 by these
functions, as a response to the crisis and
building the infrastructure to deliver robust
regulatory outcomes in the future.
3.2.2. Responding to the crisis
a. From the stress test to the bank
capitalisation exercise
As the EBA reported in its annual report for
2011, a major piece of work for that year was
the stress test exercise. Although the macro-
economic environment deteriorated rapidly
during the course of the exercise, the exer-
cise nonetheless achieved an unprecedented
transparency of results and methodology, and
a common EU definition of Core Tier 1 capital,
which allowed analysts to make clear assess-
ments of banks. Moreover, the EBA immedi-
ately followed up the stress test exercise in
the latter half of 2011 with a recapitalisation
recommendation to national competent au-
thorities requiring banks to raise their capital
levels.
0
20
40
60
80
100
120
Initial shortfall,
75.8
Initial shortfall
Recap amount,
78.9
Recap amount
billion EUR
RWA measures,
32.5
Ongoing backstops,
4.3
Final recap amount:
115.7
Direct capital measures,
83.2
Final recap amount against the initial shortfall
Figure 2: Initial capital shortfall and final recapitalisation amount