natgillin/translations-raw huggingface dataset:
In addition, widely different national practices on regulatory adjustments to capital complicate convergence on trigger points for intervention.
In addition, widely different national practices on regulatory adjustments to capital complicate convergence on trigger points for intervention.
Despite this difficulty, it is important to work towards a common minimum set of early intervention tools among all EU countries.
Despite this difficulty, it is important to work towards a common minimum set of early intervention tools among all EU countries.
A common set of intervention tools should be available to all EEA supervisors at certain predefined stages of early stress, and these tools should if required be applicable without shareholder consent.
A common set of intervention tools should be available to all EEA supervisors at certain predefined stages of early stress, and these tools should if required be applicable without shareholder consent.
The new Basel proposal for a “capital conservation rule” could be a starting point for developing such early intervention triggers in the EU. [1]
The new Basel proposal for a “capital conservation rule” could be a starting point for developing such early intervention triggers in the EU. [1]
If implemented, this will introduce some elements of “prompt corrective action” in the European crisis management system, while preserving supervisory discretionary powers.
If implemented, this will introduce some elements of “prompt corrective action” in the European crisis management system, while preserving supervisory discretionary powers.
“Living wills” are, in our view, also an essential element of the new EU crisis management framework.
“Living wills” are, in our view, also an essential element of the new EU crisis management framework.
All cross-border banks should be required to have one in place, not only the largest ones.
All cross-border banks should be required to have one in place, not only the largest ones.
That way, one would also avoid having to decide which cross-border banks are large (systemic) and which are not.
That way, one would also avoid having to decide which cross-border banks are large (systemic) and which are not.
For small banks with uncomplicated structures setting up a living will involve minor costs.
For small banks with uncomplicated structures setting up a living will involve minor costs.
Living wills would be an important part of a “cross-border license” for banks, covering issues such as legal structures, IT infrastructure, and capital and liquidity buffers.
Living wills would be an important part of a “cross-border license” for banks, covering issues such as legal structures, IT infrastructure, and capital and liquidity buffers.
The Financial Stability Board has recently pointed out that such contingency plans for banks actually need two distinct components.
The Financial Stability Board has recently pointed out that such contingency plans for banks actually need two distinct components.
These two should be developed and discussed proactively with senior management of all cross-border banks.
These two should be developed and discussed proactively with senior management of all cross-border banks.
In Norway, we have for long favored a holding company approach to financial institutions and as a result most of our financial groups have fairly transparent organisational structures.
In Norway, we have for long favored a holding company approach to financial institutions and as a result most of our financial groups have fairly transparent organisational structures.
Intra-group asset transfers
Intra-group asset transfers
Is the development of a framework for asset transfer feasible?
Is the development of a framework for asset transfer feasible?
If so, what challenges would need to be addressed?
If so, what challenges would need to be addressed?
What safeguards for shareholders and creditors are needed?
What safeguards for shareholders and creditors are needed?
This is a particularly contentious issue for cross-border banking groups with business like organisations.
This is a particularly contentious issue for cross-border banking groups with business like organisations.
Sorting out the responsibilities for such cross-border EU groups is therefore a precondition for any new framework for asset transfers.
Sorting out the responsibilities for such cross-border EU groups is therefore a precondition for any new framework for asset transfers.
The Communication (and the staff paper) suggest that asset transfers could be acceptable prior to insolvency and outside of resolution under certain circumstances.
The Communication (and the staff paper) suggest that asset transfers could be acceptable prior to insolvency and outside of resolution under certain circumstances.
It notes that asset transfers on commercial terms takes place within all banking groups as part of their regular liquidity management.
It notes that asset transfers on commercial terms takes place within all banking groups as part of their regular liquidity management.
This could prevent intra-group asset transfers that might be in the best interest of the banking group.
This could prevent intra-group asset transfers that might be in the best interest of the banking group.
As the Communication suggests, a possible solution could be stronger “group assurances” from the parent bank (and home authorities) as a pre-condition for such asset transfers.
As the Communication suggests, a possible solution could be stronger “group assurances” from the parent bank (and home authorities) as a pre-condition for such asset transfers.
The alternative would be a transformation of the group to either a branch-based or a real subsidiary-based structure (see section on burden sharing below for further comments on the concept of “group support”).
The alternative would be a transformation of the group to either a branch-based or a real subsidiary-based structure (see section on burden sharing below for further comments on the concept of “group support”).
BANK RESOLUTION
BANK RESOLUTION
Why is EU action on bank resolution needed?
Why is EU action on bank resolution needed?
What should be the key objectives and priorities for an EU bank resolution framework?
What should be the key objectives and priorities for an EU bank resolution framework?
The recent crisis exposed the EU’s lack of an effective resolution framework, despite the recently agreed Memorandum of Understanding on crisis management.
The recent crisis exposed the EU’s lack of an effective resolution framework, despite the recently agreed Memorandum of Understanding on crisis management.
To achieve a common banking market the EU needs a common framework for cross-border crisis management.
To achieve a common banking market the EU needs a common framework for cross-border crisis management.
If private sector participants know that the tool kit is not suited for time critical interventions; they will expect to be bailed out and gamble for resurrection when facing difficulties.
If private sector participants know that the tool kit is not suited for time critical interventions; they will expect to be bailed out and gamble for resurrection when facing difficulties.
Action is therefore needed on three fronts:
Action is therefore needed on three fronts:
Improve insolvency regimes in all EU states to enable quick closure of small failing banks (not necessarily full harmonization)
Improve insolvency regimes in all EU states to enable quick closure of small failing banks (not necessarily full harmonization)
Establish more robust resolution regimes for larger (predominantly national) banks and cross-border banks with branch structures.
Establish more robust resolution regimes for larger (predominantly national) banks and cross-border banks with branch structures.
Add a new crisis management framework specifically for cross border banking groups with subsidiary structures.
Add a new crisis management framework specifically for cross border banking groups with subsidiary structures.
What resolution tools are needed?
What resolution tools are needed?
What are the key tools for an EU resolution regime?
What are the key tools for an EU resolution regime?
All EEA authorities should as a minimum have a resolution toolkit available to
All EEA authorities should as a minimum have a resolution toolkit available to
split and transfer assets,
split and transfer assets,
establish a bridge bank to secure essential banking services,
establish a bridge bank to secure essential banking services,
seize and run a bank (temporary public ownership).
seize and run a bank (temporary public ownership).
Specifically, authorities need to be able to impose these resolution measures without shareholder approval.
Specifically, authorities need to be able to impose these resolution measures without shareholder approval.
It is in this regard important to determine which legal changes are required to enable resolved banks to continue vital operations. [3]
It is in this regard important to determine which legal changes are required to enable resolved banks to continue vital operations. [3]
Threshold conditions and timing for use of tools
Threshold conditions and timing for use of tools
What are the appropriate thresholds for the use of resolution tools?
What are the appropriate thresholds for the use of resolution tools?
Resolution tools can be activated either based on a discretionary judgment (UK FSA threshold conditions) or based on hard (solvency) triggers (US FDIC).
Resolution tools can be activated either based on a discretionary judgment (UK FSA threshold conditions) or based on hard (solvency) triggers (US FDIC).
A resolution system based exclusively on solvency levels as triggers may not be sufficiently robust to valuation issues in a crisis.
A resolution system based exclusively on solvency levels as triggers may not be sufficiently robust to valuation issues in a crisis.
However, the system should also include some clear minimum thresholds leading to prompt resolution well before the bank is balance sheet insolvent. [4]
However, the system should also include some clear minimum thresholds leading to prompt resolution well before the bank is balance sheet insolvent. [4]
In Norway, authorities were given strong intervention powers after the banking crisis in the early 90s, including the power to write down share capital and subordinated loans on a going concern basis.
In Norway, authorities were given strong intervention powers after the banking crisis in the early 90s, including the power to write down share capital and subordinated loans on a going concern basis.
An additional problem area exposed by the current crisis is the widely divergent parameters used by certain IRB banks for similar credit categories.
An additional problem area exposed by the current crisis is the widely divergent parameters used by certain IRB banks for similar credit categories.
A first step could be to clarify national differences in the EU, and then to look for common approaches to intervention within existing legal mandates.
A first step could be to clarify national differences in the EU, and then to look for common approaches to intervention within existing legal mandates.
Thereafter, new legal tools could be implemented by those authorities with weak tool kits.
Thereafter, new legal tools could be implemented by those authorities with weak tool kits.
The proposed BCBS measures on international standards for capital levels and quality should in any case facilitate a more consistent approach to resolution measures. [5]
The proposed BCBS measures on international standards for capital levels and quality should in any case facilitate a more consistent approach to resolution measures. [5]
Similar intervention threshold may also facilitate coordinated crisis intervention in cross-border banking groups.
Similar intervention threshold may also facilitate coordinated crisis intervention in cross-border banking groups.
Given the uncertainties regarding the crisis management framework for cross border banks, intervention thresholds should ideally kick in earlier for these banks than for pure domestic banks.
Given the uncertainties regarding the crisis management framework for cross border banks, intervention thresholds should ideally kick in earlier for these banks than for pure domestic banks.
They should also be required to hold ample buffers commensurate with the increased risk related to such groups.
They should also be required to hold ample buffers commensurate with the increased risk related to such groups.
Scope of the bank resolution framework
Scope of the bank resolution framework
What should be the scope of an EU resolution framework?
What should be the scope of an EU resolution framework?
Should it only focus on deposit-taking banks (as opposed to any other regulated financial institution)?
Should it only focus on deposit-taking banks (as opposed to any other regulated financial institution)?
If so, should it apply only to cross-border banking groups or should it also encompass single entities which only operate cross-border through branches?
If so, should it apply only to cross-border banking groups or should it also encompass single entities which only operate cross-border through branches?
Full harmonization of national resolution and insolvency laws will probably not be feasible in the short run, even though all national insolvency laws should be required to incorporate certain key minimum features.
Full harmonization of national resolution and insolvency laws will probably not be feasible in the short run, even though all national insolvency laws should be required to incorporate certain key minimum features.
We do not favour a special crisis management framework for (only) systemic banks.
We do not favour a special crisis management framework for (only) systemic banks.
Stakeholders' rights in bank resolution procedures
Stakeholders' rights in bank resolution procedures
What appropriate safeguards, review or compensation mechanisms for shareholders, creditors and counterparties would be appropriate?
What appropriate safeguards, review or compensation mechanisms for shareholders, creditors and counterparties would be appropriate?
Adjustments need to be made to relevant EU legislation to enable authorities to implement the new resolution regime, while at the same time preserving shareholders rights (according the ECHR).
Adjustments need to be made to relevant EU legislation to enable authorities to implement the new resolution regime, while at the same time preserving shareholders rights (according the ECHR).
Application of resolution measures to a banking group
Application of resolution measures to a banking group
How can cooperation and communication between authorities and administrators responsible for the resolution and insolvency of a cross border banking group be improved?
How can cooperation and communication between authorities and administrators responsible for the resolution and insolvency of a cross border banking group be improved?
Is integrated resolution through a European Resolution Authority for banking groups desirable and feasible?
Is integrated resolution through a European Resolution Authority for banking groups desirable and feasible?
If this option is not considered feasible, what minimum national resolution measures for a cross-border banking group are necessary?
If this option is not considered feasible, what minimum national resolution measures for a cross-border banking group are necessary?
Crisis coordination between national authorities will be greatly facilitated if all EU countries have a common minimum tool kit in place.
Crisis coordination between national authorities will be greatly facilitated if all EU countries have a common minimum tool kit in place.
Large cross-border banking groups with business line organization, but with legal subsidiary structure, pose a special challenge for crisis resolution, as noted in the Communication.
Large cross-border banking groups with business line organization, but with legal subsidiary structure, pose a special challenge for crisis resolution, as noted in the Communication.
Clarifying the responsibilities for cross-border banking groups with business line organization is in our view key to further progress on cross-border crisis resolution in the EU.
Clarifying the responsibilities for cross-border banking groups with business line organization is in our view key to further progress on cross-border crisis resolution in the EU.
Financing a cross-border resolution
Financing a cross-border resolution
What is the most appropriate way to secure cross-border funding for bank resolution measures?
What is the most appropriate way to secure cross-border funding for bank resolution measures?
What role is there for specific private sector funding?
What role is there for specific private sector funding?
Is establishing ex-ante crisis funding arrangements practical?
Is establishing ex-ante crisis funding arrangements practical?
If not, how could private sector solutions best address the issue?
If not, how could private sector solutions best address the issue?
Is there scope to achieve greater clarity on burden sharing?
Is there scope to achieve greater clarity on burden sharing?
If so, would the first priority be to define principles for burden sharing?
If so, would the first priority be to define principles for burden sharing?
This goes beyond simply writing down shareholder capital and removing management of failing institutions.
This goes beyond simply writing down shareholder capital and removing management of failing institutions.
Deposit insurance schemes should also be allowed to contribute to such private based crisis resolutions.
Deposit insurance schemes should also be allowed to contribute to such private based crisis resolutions.
In addition, we support ongoing work that explores various ways of spreading the cost of bank resolutions among shareholders and unsecured creditors, for example through the use of contingent capital instruments or debt-for-equity swaps.
In addition, we support ongoing work that explores various ways of spreading the cost of bank resolutions among shareholders and unsecured creditors, for example through the use of contingent capital instruments or debt-for-equity swaps.
Increasing the scope for private sector solutions should reduce the need for fiscal burden sharing among host and home authorities.
Increasing the scope for private sector solutions should reduce the need for fiscal burden sharing among host and home authorities.
In our view, priority should be given to improving national crisis resolution and insolvency systems and requesting cross-border banks to develop recovery and resolution plans.
In our view, priority should be given to improving national crisis resolution and insolvency systems and requesting cross-border banks to develop recovery and resolution plans.
The parent bank could be requested to provide “support statements” for the host banks (letter of comfort, contribution orders, etc.).
The parent bank could be requested to provide “support statements” for the host banks (letter of comfort, contribution orders, etc.).
This should clearly be considered a last option.
This should clearly be considered a last option.
INSOLVENCY
INSOLVENCY
A harmonised EU insolvency regime for banks
A harmonised EU insolvency regime for banks
Is a more integrated insolvency framework for banking groups needed?
Is a more integrated insolvency framework for banking groups needed?
If so, how should it be designed?
If so, how should it be designed?
Should there be a separate and self contained insolvency regime for cross-border banks?
Should there be a separate and self contained insolvency regime for cross-border banks?
A fully harmonized insolvency regime in the EU may not be feasible in the short run.
A fully harmonized insolvency regime in the EU may not be feasible in the short run.
A minimum harmonization of national insolvency and resolution regimes should be attempted, focusing on a few critical features that all national regimes should incorporate.
A minimum harmonization of national insolvency and resolution regimes should be attempted, focusing on a few critical features that all national regimes should incorporate.
Additional minimum requirement for banks wishing to conduct cross-border business in Europe should then be enacted, on a national level and with supplementary powers to the new European Banking Authority.
Additional minimum requirement for banks wishing to conduct cross-border business in Europe should then be enacted, on a national level and with supplementary powers to the new European Banking Authority.
As noted above, clarifying responsibilities for resolving complex corporate structures where form does not follow function should be a priority.
As noted above, clarifying responsibilities for resolving complex corporate structures where form does not follow function should be a priority.
Thorvald Grung Moe
Thorvald Grung Moe
US legislation enabling the FDIC to set up bridge banks and preserve derivative contracts without operational interruption.
US legislation enabling the FDIC to set up bridge banks and preserve derivative contracts without operational interruption.
Introduction Norges Bank and Finanstilsynet support establishing mechanisms to ensure that banks build up countercyclical capital buffers.
Introduction Norges Bank and Finanstilsynet support establishing mechanisms to ensure that banks build up countercyclical capital buffers.
In summary our position is that:
In summary our position is that:
ii) The countercyclical buffer should consist of common equity only.
ii) The countercyclical buffer should consist of common equity only.
iii) The countercyclical buffer framework should be implemented as soon as possible.
iii) The countercyclical buffer framework should be implemented as soon as possible.
Question 1 Norges Bank and Finanstilsynet generally support a strengthening of host supervisory authority powers in EU regulation, and thus strongly prefer the approach to determining the bank-specific buffers proposed by the Basel Committee.
Question 1 Norges Bank and Finanstilsynet generally support a strengthening of host supervisory authority powers in EU regulation, and thus strongly prefer the approach to determining the bank-specific buffers proposed by the Basel Committee.
The European Commission presents two possible alternative approaches.
The European Commission presents two possible alternative approaches.
This opportunity risks blurring the distinction between individual pillar 2 issues and macroprudential issues.
This opportunity risks blurring the distinction between individual pillar 2 issues and macroprudential issues.
Consequently, buffer decisions by national authorities may not have full effect on the macroprudential risks in the jurisdiction.
Consequently, buffer decisions by national authorities may not have full effect on the macroprudential risks in the jurisdiction.
Question 2 Norges Bank and Finanstilsynet believe the Basel approach will lead to less regulatory arbitrage than alternative A and B of the Commission.
Question 2 Norges Bank and Finanstilsynet believe the Basel approach will lead to less regulatory arbitrage than alternative A and B of the Commission.
Question 3 Norges Bank and Finanstilsynet support applying the countercyclical buffer requirement at solo, sub-consolidated and consolidated basis.
Question 3 Norges Bank and Finanstilsynet support applying the countercyclical buffer requirement at solo, sub-consolidated and consolidated basis.
The very existence of a higher buffer option might also have a dampening effect.
The very existence of a higher buffer option might also have a dampening effect.
We believe the European Systemic Risk Board could promote these aims.
We believe the European Systemic Risk Board could promote these aims.
Question 6 Under the Basel approach host countries must rely on home country authorities to enforce the buffer decisions of host countries for foreign branches.
Question 6 Under the Basel approach host countries must rely on home country authorities to enforce the buffer decisions of host countries for foreign branches.