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Conference on Financial Integration and Stability in Europe Madrid, 30 November-1 December 2006

Conference on Financial Integration and Stability in Europe Madrid, 30 November-1 December 2006. Remarks by Henk Brouwer Executive Director, De Nederlandsche Bank. 1 Update conclusions EFC Reports Report on Financial Stability (2000) - Recommendations :.

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Conference on Financial Integration and Stability in Europe Madrid, 30 November-1 December 2006

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  1. Conference onFinancial Integration and Stability in EuropeMadrid, 30 November-1 December 2006 Remarks by Henk Brouwer Executive Director, De Nederlandsche Bank

  2. 1 Update conclusions EFC ReportsReport on Financial Stability (2000) - Recommendations: • Strengthen cross-sector co-operation at international level • Exchange of information among supervisors and between supervisors and central banks • Strengthen co-operation between supervisors and central banks • Convergence of supervisory practices

  3. 1 Update conclusions EFC ReportsReport on Financial Crisis Management (2001) - Recommendations: • Supervisors ensure that management information systems of financial institutions is adequate • In a crisis, timely exchange of information  remove legal impediments and develop checklists • Agreement on co-ordinating supervisor • Develop MoUs to deal with crisis management issues • Timely and robust procedures competition authorities

  4. 1 Update conclusions EFC ReportsInstitutional developments since 2001: • Lamfalussy approach in securities markets + banking and insurance regulation • Supervisory convergence promoted by Level 3 committees • Multilateral MoUs on crisis management (2003, 2005) • Crisis simulations to test cooperation • Agreement on co-ordinating supervisor

  5. 2 Are current regulatory arrangements in line with developments in financial markets?Market developments: • Growth in size and complexity of financial institutions→ LCFI´s • Internationalisation and centralisation of internal functions→ cross-border issues • Blurring of distinctions between financial sectors  financial conglomerates, cross-sector issues • Rise of non-regulated institutions

  6. 2 Are current regulatory arrangements in line with developments in financial markets?Regulatory arrangements: • Institutional framework EU remains sectorally oriented + country based • Home country control was instrumental in furthering integration, but … • ...its limitations are becoming apparent: • role of subsidiaries and their supervisors • financial stability implications in case of foreign ownership • crisis management

  7. 3 Is the European institutional set-up adequate for preventing and handling financial crisis ? • Crisis prevention: supervisory framework works, although not perfectly: • conceptual issues (home control, cross-sector) • inefficiencies (hence: striving for convergence, but financial industry complaints and demands) • institutional framework and supervision necessary, but not sufficient conditions for financial stability ● Crisis management: EU framework not seriously tested yet

  8. Agenda • Convergence • Coordination mechanisms • Involve central banks • Expand on home country control … • ... but involve host countries • Burden sharing

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