Basel IV: The Challenge of II Pillar for Risk Management Function

The book is based on Supervisory Review and Evaluation Process (SREP) is conducted annually by the Supervisory Authorities to verify that each bank (Significant/Less Significant) has implemented strategies, processes, capital, and liquidity assessment process appropriate to the business model and overall planning activity and risk governance system. Analysis of the aims, the features, and the different phases of SREP and the proportionality principles on which the Single Rulebook is based. Some reflections about proportionality principle of Single Rule Book and new skills required to Risk Management function. The research emphasised the need for a holistic approach also in Risk Management and the bank’s business activity.

Part II The Transatlantic Dialogue, 7 The New European Capital Markets

This chapter looks at the new European capital markets. The creation of the European Securities and Markets Authority (ESMA) was ‘an epochal date for EU financial market regulation’. Whereas ESMA's role is primarily one of overall supervision and promotion of supervisory convergence, the 2007–09 financial crisis, which led to its birth, continues incrementally to push the European legislator toward reinforcing ESMA's powers and capturing increasingly more activities under the ‘Single Rulebook’. With the proposal of a Capital Markets Union and Brexit, this trend is likely to continue. Potentially, the European Union is now well placed to forge a new paradigm for the regulation of capital markets, given the increased focus and the technical expertise which ESMA brings to bear. At least in theory, the EU should no longer be beholden to US or international models for its regulatory models.

EU Financial Market Governance and the Covid-19 Crisis: ESMA’s Nimble, Responsive, and Speedy Response in Coordinating National Authorities through Soft-Law Instruments

The initial evidence indicates that EU financial market governance has performed well in its response to the Covid-19 crisis. In the European Union (EU), the need for coordination and cooperation over this crisis has been a particular concern given that national competent authorities (NCAs) operate under the single rulebook and supervisory action must, accordingly, be consistent. The European Securities and Markets Authority (ESMA) has, however, shown itself to be nimble, responsive, and speedy in deploying its supervisory powers, including those additional powers it has recently been granted under the 2019 ESA Reform Regulation. This has particularly been the case as regards the application by NCAs of ‘supervisory forbearance’ and as regards the application of market disclosures rules, notably the financial reporting standard IFRS 9. ESMA has also been successful in coordinating the few NCAs which decided to impose restrictions on short selling. ESMA’s actions during the Covid-19 crisis underline the de facto power it wields through its soft supervisory convergence powers and the entrepreneurial but effective approach it deploys in their use.See generally, Niamh Moloney, the Age of ESMA. Governing EU Financial Markets (Hart Publishing, 2018), chapter 4.

PREVIOUS EXPERIENCES ON THE ESTABLISHMENT AND DEVELOPMENT OF THE EUROPEAN BANKING UNION

The De Larosiére report initiating the establishment of the financial system of the European Union was published in the year following the global economic crisis of 2008, on 25 February 2009. Already in June of this year, the European Council accepted a document known as the Single Rulebook, which contains common rules related to the financial sector of the EU, however, the real break-through was achieved with the working paper accepted by the European Committee in December 2012, which initiated the establishment of the institutional system of the banking union. The individual elements of the system constituted by three pillars have been gradually developed, however, it is still not complete. The single banking supervising system started its operation in November 2014, the resolution mechanism in January 2016, however, the single deposit-guarantee system has not yet been established. The purpose of the study is to present the events of the recent 11 years, during which the currently known institutional system of the banking union was established.

I requisiti degli strumenti di capitale primario di classe 1 Appunti per uno studio del capitale delle banche

L'esigenza di stabilità del sistema finanziario ed economico scaturita all'esito della più rilevante delle recenti crisi finanziarie ha costituito la premessa della regolazione del capitale bancario elaborata dal Comitato di Basilea. Nel volgere di poco tempo, per rispondere a esigenze analoghe, il legislatore europeo ha rinnovato profondamente la regolazione bancaria europea con il risultato di dar vita al Single Rulebook. Una parte rilevante di questo strumento di armonizzazione è affidata al Regolamento 575/2013 in materia di requisiti prudenziali (Capital Requirement Regulation, inde CRR). Il CRR individua i requisiti di capitalizzazione delle banche determinando le regole per la formazione del capitale bancario e i rapporti di equilibrio tra i vari elementi del finanziamento bancario in base alla rischiosità delle attività. Il capitale primario di classe 1 (common equity tier 1, CET1) è una delle componenti fondamentali del capitale bancario. Lo studio espone gli elementi strutturali del capitale bancario e i requisiti che gli strumenti di capitale devono possedere per poter essere classificati come CET1. Inoltre, lo scritto evidenzia quei profili in cui la disciplina prudenziale si sovrappone a quella societaria e annota quei temi su cui si potrebbero soffermare ulteriori analisi del rapporto tra le discipline.

Macroprudential aspects of the banking union

The present paper addresses the main macroprudential aspects of the Banking Union, that arose as a reply to the European sovereign debt crisis. After the Great Recession, at international level, a certain consensus was reached regarding the necessity to set out and implement this kind of macroprudential regulation to achieve a robust financial sector. Because of this, from this perspective, each of the fundamental pillars of the Banking Union is analysed, just as its single rulebook, to check if it is in existence and, in this case, if it is sufficient. Equally, some financial indicators are studied to check if regulatory changes are reflected in the data, in the full knowledge that the new mechanism has been in place for a short time. Finally, some ideas and proposals are suggested to improve several macroprudential elements of the Banking Union.

Does the New European Banking Regulation discourage Earnings Management?

In the recent past, the financial crisis has shown important lacks in the EU regulation relating to the banking sector, making the introduction of a unified regulatory framework necessary. Since June 2009 the European Council has recommended a “Single Rulebook”, that is a unique and harmonizing discipline applicable to all financial institutions in the Single Market, become effective on January 2014. This prudential discipline requires much more minimum capital, liquidity and information transparency and it defines format and minimum standards of contents.The aim of this research is to investigate the relation between the new mandatory disclosure and earnings management policies in banking sector realized through Loan Loss Provisions (LLP), the component of income statement mainly subject to manipulations, especially in form of earnings smoothing. Because the new integrated regulatory framework requires a more transparent disclosure, we expected that accruals manipulation (basically LLP) could be discouraged. The empirical analysis is based on a sample of 116 listed European banks over the period prior (2011-2012-2013) and after (2014-2015-2016) the effective date of the Single Rulebook. The evidence confirm our hypothesis suggesting that this banking reform discourages earnings manipulation and improves earnings quality, making financial reporting more useful for investors. The results are important to the regulatory institutions (such as European Union and European Central Bank) supporting more stringent discipline introduced by Basel III.