APPENDIX 3: CALL FOR EVIDENCE
The House of Lords EU Sub-Committee on Economic and
Financial Affairs, chaired by Lord Harrison, is launching an inquiry
into reform of the EU Banking Sector. We invite you to contribute
evidence to this inquiry.
The ongoing euro area crisis, and the strain that
it has placed on the EU banking sector, has led to calls for reform
of the way in which the banking sector operates and is regulated.
Proposals for an EU Directive on bank recovery and resolution
were published in June. However, these proposals have already
been subsumed into a wider debate about the steps towards "banking
union" that are needed if the financial crisis is to be resolved.
The June 2012 report of the President of the European
Council, Herman Van Rompuy, Towards a Genuine Economic and
Monetary Union, proposes a vision for a stable and prosperous
EMU based on "four essential building blocks", including
an integrated financial framework elevating responsibility for
bank supervision to European level, and providing common mechanisms
to resolve banks and guarantee customer deposits.
At a summit on 28-29 June 2012, euro area leaders
confirmed their intention to "break the vicious circle between
banks and sovereigns", including through the development
of a single banking supervisory mechanism, with a key role for
the European Central Bank (ECB). These proposals are expected
to be published shortly. At the same time, President Van Rompuy
has been commissioned to develop "a specific and time-bound
road map for the achievement of a genuine Economic and Monetary
Union".
Although the Government have made clear that the
UK will not take part in the fundamental elements of a banking
union, the implications of these developments for the UK cannot
be ignored. The Government argue that the UK's non-participation
should not and need not adversely affect London's position as
the leading financial centre in Europe, nor undermine the single
market. The strength of this argument may soon be tested.
The Sub-Committee welcomes evidence on the proposals
that have been set out so far, and, given that this is a fast-moving
agenda, also welcomes further evidence on the proposals for reform
as they continue to take shape in the coming weeks and months.
Particular questions raised to which we invite
you to respond are as follows (there is no need for individual
submissions to deal with all of the issues, and witnesses are
also invited to deal with any additional issues or proposals that
emerge in the weeks and months after the Call for Evidence is
published):
Banking reform, banking union and the euro area crisis
(1) What has the euro area crisis revealed about
the weaknesses of the EU banking sector? In what ways do you believe
that the EU banking sector needs to be reformed?
(2) Steps towards 'banking union' were set out
in the Van Rompuy report Towards a Genuine Economic and Monetary
Union. How would you define 'banking union' in the EU context?
What is your assessment of the report's conclusions, and what
will its impact be on existing proposals (such as CRD IV)? What
are the key elements of such a banking union if it is to function
effectively?
(3) The 28/29 June euro area summit statement
said that when an effective single supervisory mechanism is established,
involving the ECB, for banks in the euro area the ESM could recapitalise
banks directly. What is your assessment of this proposal? How
likely is it that this would successfully stabilise the EU banking
sector?
(4) In January 2012 European Commissioner Michel
Barnier set up a high level expert group to explore possible ways
to reform the structure of the EU banking sector, including consideration
of structural reforms such as activity restrictions as applies
under the Volcker Rule, size limits, and structural separation
of retail deposit banks from investment banking. What is your
assessment of such proposals for structural reforms? Which, if
any, would help ensure the future health of the EU banking sector?
Banking supervision
(5) The European Commission are expected to present
proposals for a single European banking supervisory framework
in September. What is the purpose of such a framework, and what
key elements need to be included if it is to succeed? How likely
is it that such a framework will be adopted?
(6) What is the most appropriate division of
responsibility between national and EU supervision under such
a framework?
(7) In what way, if at all, should supervisory
powers vary depending on the size and nature of banks?
(8) What powers and responsibilities is it appropriate
for the ECB to possess in relation to regulation of the European
banking sector, and in particular in relation to supervision of
euro area banks? How should the ECB be held accountable for the
exercise of such responsibilities?
European Deposit Insurance schemes
(9) What is your assessment of the Van Rompuy
proposals for a European deposit insurance scheme for banks, to
be overseen under the new European banking supervisory framework
and with the ESM as a fiscal backstop? What is the purpose of
the proposal and what will its impact be on the existing Deposit
Guarantee Schemes Directive proposal? Is it likely to be effective?
How likely is it that such proposals will be enacted?
The proposed Directive for bank recovery and resolution
(10) What is your assessment of the proposed
Directive (COM (2012) 280) establishing a framework for the recovery
and resolution of credit institutions and investment firms? What
will be the impact on these proposals of the steps towards banking
union (including a resolution framework) as set out in the Van
Rompuy report?
(11) What will be the impact of the Directive
upon the European Banking Authority (EBA)? Are the new responsibilities
proposed under the Directive for the EBA appropriate?
(12) What is your assessment of the proposed
'bail-in' tool (Articles 37-38 and 41-50)?
(13) What is your assessment of the following
specific elements of the Commission's proposals, as set out in
the Directive, in relation to:
(a) Recovery and resolution planning (Articles
5-12)?
(b) Group recovery and resolution and cross-border
activity (including resolution colleges) (Articles 7-8, 11-12
and 80-83)?
(c) Preventative powers (Articles 13 and 14)?
(d) Intra-group financial support (Articles 16-22)?
(e) Early intervention measures, including the
'Special Manager' tool (Articles 23 and 24)?
(f) The various resolution tools, including sale
of business, bridge institution and asset separation (Articles
31-55)?
(g) Cooperation with third country authorities
(Articles 84-89)?
(h) The proposed system of financing arrangements
(Articles 90-99)?
The impact on the UK
(14) The Government have made clear that the
UK will not take part in the fundamental elements of a banking
union, and will neither be part of common deposit guarantees nor
come under the jurisdiction of a single European financial supervisor.
What is your assessment of this position? How should the UK respond
to these proposals?
(15) What will be the implications of steps towards
banking union for those countries, such as the UK, that intend
to stand apart? How realistic is the Government's argument that
the UK's non-participation should not and need not adversely affect
London's position as the leading financial centre in Europe, nor
adversely affect the operation of the single market?
(16) How do you assess the risk that, as elements
of a banking union, including supervision, are addressed by a
subset of its members, the Council's role in banking regulation
will be undercut, with its legislative debates pre-empted and/or
decisions pre-determined in discussion amongst banking union members?
The deadline for written evidence is Monday 1
October 2012.
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