# Memorandum of Understanding on Cooperation between the Financial Supervisory Authorities, Central Banks and Finance Ministries of the European Union on Cross-Border Financial Stability/Annexes

See the entirety of the memorandum beginning with the annexes here.
INTRODUCTION
This Memorandum is an extension and update of the 2005 Memorandum and is based on Council conclusions of 9 October 2007; and on the EFC Report of 5 September 2007 (doc. ECFIN/CEFCPE(2007)REP/53990) endorsed by the EU Finance Ministers and Central Bank Governors. The agreement of the Parties1 leading to this Memorandum is based on the following considerations:
(1) The integration of financial markets and financial infrastructures in the European Union (EU), together with the growing number of large and complex financial groups with cross-border operations, contributes to the efficiency and stability of the EU financial system. At the same time, financial integration increases the scope for cross-border and cross-sector contagion and thus the likelihood of a systemic crisis affecting more than one Member State. Financial stability is, therefore, a common concern for all Member States and the EU as a whole, and must be safeguarded on the basis of close cooperation among all Parties, taking also into account the wider international context.
(2) In order to limit the economic impact of a cross-border systemic financial crisis, the EU arrangements for crisis management and resolution must allow a timely and effective response. Crisis preparation in advance is necessary, while preserving sufficient flexibility to deal with the specific circumstances of any potential crisis. Accordingly, it is important to have in place at the EU level common principles, procedures and practical arrangements concerning cooperation among the authorities responsible for preserving financial stability.
(3) The Parties see this Memorandum as an appropriate instrument for setting out further arrangements, promoting cooperation between them and preparing for the management and resolution of a cross-border systemic financial crisis. The Parties will cooperate through appropriate procedures for sharing of information, views and assessments so as to facilitate the pursuance of their respective policy functions in the management and resolution of a crisis, and to preserve financial stability at a minimum cost. In particular, the Relevant Parties should at any time be in a position to timely engage in informed discussions amongst themselves at the cross- border level.
(4) Assessing the potential for systemic implications of a financial crisis is a necessary starting point for any coordinated action among the Relevant Parties. The Parties agree that such assessments should make use of a common analytical framework in order to enhance communication and facilitate agreement on a joint assessment. Responsibility for conducting these assessments lies with the Financial Supervisory Authorities and Central Banks. Finance Ministries should be kept fully informed of the process and the outcome of the assessments so as to ensure that a common systemic assessment can be promptly achieved among Relevant Parties at the national level.
(5) Cooperation between the Parties will take place on the basis of the existing institutional and legal framework for financial stability in Member States as well as the applicable Community legislation, fully respecting the roles and the division of responsibilities among the Parties. In The definitions to the words written in italics are found under "Key definitions used in the Memorandum". particular, in the context of this Memorandum, Financial Supervisory Authorities' responsibilities should be interpreted in accordance with the applicable Community directives, including the role of Group Supervisor, with regard to each authority's capacity to contribute to preserving the soundness of individual financial groups as well as of the financial system as a whole. Central banks’ responsibilities should be interpreted with regard to their functions relating to monetary policy and oversight of payment systems, as well as to their task to contribute to the financial stability. Finance Ministries’ responsibilities should be interpreted with regard to their overall political responsibility for the stability of the financial system and their role in the management and resolution of systemic financial crises, in particular regarding the involvement of public funds.
(6) Financial crisis situations may in practice involve a wider range of functions and authorities than those represented by the Parties, including deposit guarantee schemes, competition policy authorities or other public authorities. Certain financial crises may require cooperation with authorities whose jurisdiction lies outside the EU. In this context, the authorities of the European Economic Area (EEA) are invited to associate themselves to this Memorandum.
(7) The Parties emphasise that this Memorandum is designed to facilitate the management and resolution of cross-border systemic financial crises and will seek to facilitate private sector solutions, to minimise the economic and social costs, while promoting market discipline and limiting moral hazard. This Memorandum does not create any legal commitment for any of the Parties to intervene in favour of anyone affected by a financial crisis.
(8) Those Parties that have specific common financial stability concerns are encouraged to develop Voluntary Specific Cooperation Agreements with a view to provide for more specific and detailed, procedures and arrangements of crisis management and resolution for their respective countries and in relevant contexts. An example of a Voluntary Specific Cooperation Agreement is attached to the Common Practical Guidelines in Annex 1 to this Memorandum.
Key definitions used in the Memorandum
Parties: Signatories of this Memorandum, i.e. Financial Supervisory Authorities, Finance Ministries and other Ministries according to national competencies, Central Banks in Member States and the European Central Bank;
Relevant Parties: A sub-set of signatories whose policy-making functions may be significantly affected by a specific financial crisis situation;
Other Relevant Bodies: Public/private entities who are not signatories of this Memorandum, but whose involvement in the procedures may be necessary (i.e. competition authorities, Deposit Guarantee Schemes, authorities in third countries);
Financial Supervisory Authority: Authority in charge of the supervision of banks and/or, insurance companies and/or investment firms and/or occupational pension funds and/or financial markets, as well as the supplementary supervision of the regulated entities in a financial conglomerate. There can be more than one Financial Supervisory Authority in a given country;
Domestic Standing Group: A group which consists of the Financial Supervisory Authorities (or a sub-set thereof), Central Banks, Finance Ministries at the national level, with the objective to enhance preparedness in normal times and facilitate the management and resolution of a financial crisis. Such a group could be extendable to also include Other Relevant Bodies.
National Coordinator: An Authority designated by the Parties of the Domestic Standing Group which, taking into account its legal competencies, is responsible for the overall coordination of activities in order to enhance preparedness in normal times and facilitate the management and resolution of a crisis at the national level in a particular crisis situation; The Party assuming the role of National Coordinator may vary according to the nature and stage of the crisis.
Cross-Border Stability Group: A group which involves all Relevant Parties from different Member States with the objective to enhance preparedness in normal times and which may facilitate the management and resolution of a cross-border financial crisis. A Cross-Border Stability Group is chaired by a Cross-Border Coordinator designated by the Group.
Cross-Border Coordinator: The Party from the home country which is responsible for the overall coordination of actions in a particular cross-border context, and which may vary according to the nature and stage of the crisis.
Group Supervisor: The supervisory authority, responsible for the supervision on a consolidated basis of an EU cross-border financial group, as defined in the current Community legislation;
Financial group: A bank, banking group, insurance undertaking or insurance group, financial conglomerate and investment firm, which is important in several Member States due to significant subsidiaries or branches in host countries;
Financial Infrastructure: Payment systems, trading and post-trading systems and other market infrastructure which may be important in several Member States.
Home country: The country of Group Supervisor responsible for the supervision on a consolidated basis.
Host country: The country which hosts relevant subsidiaries or branches.
Cooperation arrangements: Arrangements agreed among Parties, possibly involving also Other Relevant Bodies, for the purpose of preserving financial stability as defined in the MoUs or corresponding engagements between authorities which specify the content of such agreements. Cooperation arrangements typically specify details of the functioning of the Domestic Standing Groups and may define Cross-Border Stability Groups.
College of Supervisors: A permanent, although flexible, structure for cooperation and coordination among supervisors responsible for and involved in the supervision over the different components of a cross-border financial group.
THE PARTIES TO THIS MEMORANDUM OF UNDERSTANDING AGREE TO THE FOLLOWING:
1. Objective and scope of the Memorandum
2. Common principles for cross-border financial crisis management
3. Cooperation arrangements
4. Activation of procedures and responsibility for co-ordination in a cross-border crisis
5. Information exchange
6. Public communication
7. Contingency planning
8. Confidentiality
9. Implementation and review of the Memorandum
10. Nature of the Memorandum
11. Entry into effect

## Note

* ↑ 2 The common principles endorsed by the ECOFIN Council of 9 October 2007.