ABBL

1. Introduction

ABBL thinks that strong and concrete measures in the field of prudential supervision and of financial stability are necessary in order to restore confidence in the global financial system. In that respect, ABBL has supported since its inception the reform of the supervisory architecture proposed in the de Larosière report and endorsed by the European Commission.

Our comments focus on the Commission proposal of a regulation establishing a European Banking Authority (the EBA). They are also applicable to the proposals establishing both other Authorities, the ESMA and the EIOPA.

2. Scope of the technical standards: Commission Staff Working Document (Section 1)

Establishing the EBA should not imbalance the current institutional structure. More specifically, the Level 2 of the Lamfalussy Approach has proven to be successful, and it should remain a prerogative of the Member States with the involvement of the European Parliament.

Against this background, we warn against an excessive transfer of the Level 2 to the EBA justified by the technical nature of the measures. As a general rule, the scope of the technical standards issued by the EBA should cover the current Level 3 of the Lamfalussy structure. On a case-by-case basis

only, some highly technical Level 2 measures could be delegated by the legislator (the Council and the European Parliament) to the EBA for issuance of a technical standard.

3. Consultation procedure for the technical standards (article 7) and for the guidelines and recommendations (article 8)

Article 7 of the Regulation states that “the Authority shall, where appropriate, conduct open public consultations on technical standards and analyse the potential related costs and benefits”. Article 8 does not mention any kind of consultation prior to the issuance of the guidelines and recommendations.

We think that the open public consultation coupled with a cost/benefits analysis should be systematic in order to make the process transparent and efficient. The concept of proportionate regulation should be an explicit prerequisite in the articles 7 and 8, and it should also be a clear general objective of the Authorities to be inserted in the list of the annex, in p.58, point 5.3.

4. Reference to the sectoral directives for the guidelines and recommendations: article 8

Unlike article 7, article 8 does not make any reference to the sectoral directives in order to precise the areas in which the guidelines and recommendations should be developed. As a consequence, the EBA will be in position to issue, at its discretion, any kind of guidelines on any topic. While recognising the guidelines and recommendations as a useful tool to promote supervisory convergence, we would appreciate a delimitation of their scope in a similar way as in article 7. Such a safeguard would provide more confidence to the stakeholders that the EBA’s resources are optimally allocated to produce efficient regulation.

Therefore, we suggest inserting the following sentence in article 8:

“the Authority may develop guidelines and recommendations in the areas specifically set out in the legislation referred to in art 1(2)”.

5. Action in emergency situations: article 10

Article 10.1 sets that the existence of an emergency situation may be decided by “the Commission, upon its own initiative or following a request by the Authority, the Council, or the ESRB”. In our view, the Commission should not be involved in such a decision. Given that emergency situations may imply the direct intervention of Member States to restore confidence, we think that the Council, in close coordination with the ESRB, is the best placed to determine the existence of an emergency situation. We do not support entrusting the EBA with the power to impose individual decisions to competent authorities in emergency situations. In the absence of a EU-wide burden sharing mechanism and in line with the safeguard concerning the fiscal responsibility of the Member States, the role of the EBA must be limited to a general coordination. The EBA should therefore not interfere with the potential rescue initiatives taken by the Member States.

6. Settlement of disagreements: article 11

Article 11.1 defines the scope of the procedure settling the disagreements as “areas where the legislation referred to in article 1(2) requires cooperation, coordination or joint decision making by competent authorities from more than one Member State”. The Commission Staff Working Document describes, in section 3, the articles of the CRD to be amended in order to ensure that the EBA will be able to settle the potential disagreements between national Authorities:

• Article 42(a) on the determination of significant branches

• Article 129(2) on the validation of internal models for a banking group

• Article 129(3) on the group risk assessment in the framework of the Pillar II

These articles allocate the final decision-making power in case of disagreement to the Host supervisor (article 42a), to the Home supervisor (art 129(2)), or to both (article 129(3)). At this stage, based on the Commission Staff Working Document, it is not clear to us to what extent the current balance of powers between Home and Host supervisors will change or not.

Our expectation is that the respective final decision-making powers of the Home and of the Host supervisors will be transferred to the EBA in order to make the arbitration process efficient and consistent.

7. Decision making: article 29

We are concerned by the Commission proposal whereby the Board of Supervisors shall decide by Qualified Majority Voting (QMV), as defined in article 205 of the Treaty, on the technical standards (article 7), the guidelines and recommendations (article 8) and on the financial provisions (chapter VI).

The EBA (and so are the ESMA and the EIOPA) are technical bodies, which must not be influenced by political considerations. In particular, the voting system should guarantee that decisions are taken in a neutral, effective and quick manner.

The system of Qualified Majority Voting (QMV) as defined in article 205 of the Treaty, which is primarily based on demographic weights, does not grant such guarantees of neutrality. Such a system encourages influence from alliances that may pollute, through exogenous elements, the technical decisions on the banks’ solvency or liquidity position for example. The QMV system is likely to result in conflicts between European supervisors. Furthermore, it does not fairly reflect the expertise of all supervisors involved. It is crucial that all Member States stand on an equal footing in the Board of Supervisors of the Authorities (be they big, small, Host or Home countries) in order to avoid political bargaining and to promote trust among the supervisory community.

We propose that the Authorities adopt the “one member, one vote” principle as a fundamental principle to their decision-making mechanism that should apply to all kinds of decisions. It has to be stressed that the “one member one vote” principle is already in use in the Governing Council of the ECB and without any exception in the 22 Community Agencies set up in the first pillar of the EU Treaty framework. By introducing the QMV, the Commission proposal would thus create a precedent for which we see no direct justification.

8. Article 30: composition of the Management Board

We do not support the presence of a representative of the Commission in the Management Board, since we think it would jeopardise the independence of this operational body.

Luxembourg, 20 October 2009

(Source: ABBL)