Page 14 - EBA 2013.2869 Risk Assesment Report final proof4

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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
12
considered it more appropriate to have a
faster implementation schedule than Basel
and the 100% LCR implementation will be
reached in 2018 (one year earlier than Basel
III). These publications and communications
reduced some uncertainties and concerns
for investors in bank instruments, allow-
ing the markets to price the risk premium
demanded for investment and expeditiously
moving capital and credit more efficiently.
Simultaneously, other measures are about
to be implemented or are being discussed
and therefore becoming increasingly clear
as concepts and that may also result in fur-
ther regulation. The numerous regulatory
reforms still under way continue to be of
concern for investors and other market par-
ticipants, well acknowledged in the RAQ re-
sponses, in particular in regard to the timing
and respective contents.
The new regulatory environment is creat-
ing significant strategic challenges, forcing
banks’ business models and a range of ac-
tivities to adjust given the new capital and
liquidity levels. There are significant imple-
mentation challenges ahead and several
procedures and policies need to be aligned
with the new rules, creating particular dif-
ficulties for banks.
Fragmentation of the EU single market
The last Risk Assessment Report published
in January 2013 presented some evidence of
fragmentation in the EU singlemarket. There
was evidence of a material scaling back of
global activities such as trade and com-
modity finance, international cross-border
lending and leasing, trading and investment
banking, in particular intra-EU cross-border
lending into economies experiencing stress
or recession. Risks of further fragmentation
of the EU single market were also evident
through the increasing national retrench-
ment of assets and liabilities, home bias and
reduced banks’ cross-border financial ac-
tivity. This trend was mainly driven by banks’
revised business strategies, changes in risk
appetite, higher funding costs and the chal-
lenging macro environment, but it was also
exacerbated by uncoordinated national poli-
cy measures, including ring-fencing of local
bank capital and liquidity. This evidence of
fragmentation and retrenchment has been
hindering the free movement of capital and
funding, increasing funding costs, signalling
supervisory divergence, rolling back inte-
gration gains and risking further safeguard
measures.
Throughout the first semester of 2013, there
have been some positive signs of decelera-
tion of the detrimental trend towards market
fragmentation. Fundamentally, the inter-
bank flows across borders and the foreign
claims have stabilised after the significant
Table 2: Key EU regulatory measures
Items already adopted or about to be adopted
Timeline
Items under consideration
Timeline
Basel 2.5 (Securitisation and market risks)
2011
CRD IV
CVA implementation
2013
Recovery & resolution
2012
BCBS
proposal on securitisations
2013
CRD IV/CRR
2013–18
Financial transaction tax
2013
CRD IV/CRR
(liquidity coverage ratio-LCR)
2015-18
MiFID II
2013
Basel III
(liquidity coverage ratio-LCR)
2015–19
Banking union
2013
G-SIFI
2016
European market infrastructure regulation
2013
Fundamental review of the trading book
2014
Crisis management directive
2014
Basel III
(NSFR/leverage ratio)
2013-18
Liikanen report recommendations
-