APPENDIX 7: GLOSSARY OF KEY INSTITUTIONS
AND ORGANISATIONS
| BCBS | The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Member countries are represented by their central bank and by their prudential supervisor if it is not the central bank. The members come from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Commission and the European Central Bank are observers.
The BCBS formulates minimum supervisory standards, guidelines and recommendations. BCBS standards do not have the force of law but can harden into law by being incorporated into national, or in the case of the EU, regional legal systems. The BCBS is responsible for the Basel III Capital Accord (2010, revised 2011), which contains the revised international regulatory standards on bank capital and liquidity.
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| EBA | The European Banking Authority is a European agency, established by Regulation (EU) 1093/2010 and operational from January 2011. The EBA is based in London. The bank supervisors of the Member States are the voting members of the EBA's Board of Supervisors. The Board of Supervisors makes decisions by simple majority or, on specified matters, by qualified majority voting (QMV). Day-to-day matters are the responsibility of the Management Board, which is comprised of the EBA Chair, six persons elected by and from national supervisory authorities and a representative of the European Commission. The UK is currently an elected member of the EBA Management Board.
The EBA's powers include: developing binding technical standards; ensuring compliance with EU law; taking certain action in the event of an emergency situation; and settling cross-border disputes between supervisors by imposing a binding decision. Decisions taken by the EBA in the exercise of its powers must not impinge in any way on the fiscal responsibilities of a Member State. Other areas in which the EBA has responsibilities include writing non-binding guidelines and recommendations, conducting peer reviews, mediating disputes between supervisors on a non-binding basis, promoting supervisory cooperation, convergence and coordination, facilitating home/host Member State relations, and providing opinions to the Union Institutions. The EBA is required to cooperate generally with the European Systemic Risk Board and to collaborate with it on certain specific matters including the development of common approaches to the identification and measurement of systemic risk and stress testing arrangements.
The EBA has conducted three rounds of stressing testing (2009, 2010, 2011). It has done so in a bottom-up fashion using methodologies, scenarios and key assumptions, which it developed in cooperation with the European Systemic Risk Board, the European Central Bank and the European Commission.
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| ECB | The European Central Bank is the central bank for the euro. It has performed this role since 1999, and is based in Frankfurt. The ECB is responsible for the determination and implementation of monetary policy for the euro area. In its monetary policy role the ECB's primary statutory objective is to maintain price stability. In performing the supervisory tasks that are proposed to be conferred on it the ECB would be required to pursue only the objectives of promoting the safety and soundness of credit institutions and the stability of the financial system, with due regard for the unity and integrity of the single market. The ECB was created by the Maastricht Treaty which entered into force in 1993. Since November 2009 its legal basis has been the Treaty on the Functioning of the European Union and the Statute of the European System of Central Banks and of the European Central Bank annexed to it.
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| EIOPA | The European Insurance and Occupational Pensions Authority is the sister EU agency to the European Banking Authority for the insurance and occupational pensions sector. It was established by Regulation (EU) 1094/2010 and has been in operation since January 2011. EIOPA is based in Frankfurt.
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| ESAs | The European Supervisory Authorities are the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.
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| ESCB | The European System of Central Banks is a composite body comprising the ECB and the national central banks of all EU Member States whether or not they have adopted the euro. The ESCB is governed by the ECB's decision-making bodies: the Governing Council and the Executive Board.
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| ESFS | The European System of Financial Supervision comprises the three European Supervisory Authorities (European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority), the Joint Committee of the European Supervisory Authorities, the European Systemic Risk Board, and national supervisors. The ESFS is a network that is intended to ensure that the rules applicable to the financial sector are properly implemented.
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| ESM | The European Stability Mechanism is an intergovernmental institution based in Luxembourg, set up to provide financial assistance to euro area Member States experiencing, or being threatened by, severe financing problems, if this is indispensable for safeguarding financial stability in the euro area as a whole. The Treaty establishing the European Stability Mechanism (ESM) entered into force on 27 September 2012. At the euro area Summit in June 2012 it was agreed that the ESM could have the possibility to recapitalise banks directly once an effective Single Supervisory Mechanism was established. Direct recapitalisation would rely on appropriate conditionality. The initial maximum lending capacity of the ESM is set at €500 billion. This is achieved with subscribed capital of €700 billion (€80 billion paid-in capital, the rest callable).
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| ESMA | The European Securities and Markets Authority is the sister EU agency to the European Banking Authority for securities and markets. It was established by Regulation (EU) 1095/2010 and has been in operation since January 2011. ESMA is based in Paris.
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| ESRB | The European Systemic Risk Board is responsible for the macro-prudential oversight of the EU financial system. This oversight is intended to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system, so as to avoid periods of widespread financial distress. The ESRB is also required to contribute to the smooth functioning of the single market and thereby ensure a sustainable contribution of the financial sector to economic growth. The ESRB was established (by Regulation 1092/2010) as part of the same package of EU institutional changes that created the European Banking Authority and the other European Supervisory Authorities. Unlike the European Supervisory Authorities, the ESRB does not have legal personality or any legally-binding powers. The ESRB can issue recommendations and warnings to the Union as a whole, to the European Commission, to Member States, to the European Supervisory Authorities and to national supervisors. The ESRB also has power to request information from a wide range of sources.
Voting members of the General Board of the ESRB include the President and the Vice-President of the ECB, the Governors of the national central banks, a member of the European Commission, and the Chairs of the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority. There are also non-voting members including one representative from each Member State's national supervisory authorities.
The ESRB is based in Frankfurt. The ECB provides its secretariat.
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| Eurogroup | The Eurogroup is the informal gathering of the finance ministers of the euro area Member States. The Eurogroup President (until the end of December 2012) is Jean-Claude Juncker, Prime Minister of Luxembourg.
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| FCA | The Financial Conduct Authority will be the UK's financial conduct supervisor from 2013. The FCA will be responsible for regulation of conduct in retail and wholesale financial markets and the infrastructure that supports those markets. The FCA will also have responsibility for the prudential regulation of firms that do not fall under the Prudential Regulation Authority's scope. The FCA's strategic objective will be to ensure that relevant markets function well. The FCA's operational objectives will be to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system, and to promote effective competition in the interests of consumers in the markets. The FCA will be required, so far as is compatible with acting in a way which advances the consumer protection objective or the integrity objective, to discharge its general functions in a way which promotes effective competition in the interests of consumers.
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| FDIC | The overarching mission of the US Federal Deposit Insurance Corporation is to maintain stability and public confidence in the US financial system. The FDIC is responsible for deposit insurance and for the management of the resolution of failing financial institutions. In the aftermath of the financial crisis the FDIC's authority has been extended beyond federally insured banks and thrift institutions to include also non-bank financial companies, and holding companies and affiliates of insured institutions. Banks that are members of the Federal Reserve must insure themselves through the FDIC. Banks that are not affiliated with the Federal Reserve (i.e. state banks without an Office of the Comptroller of the Currency charter and access to the Federal Reserve's payment and liquidity facilities) are often required to insure themselves through the FDIC.
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| Federal Reserve | The US Federal Reserve, which originated in the Federal Reserve Act of 1913, a measure signed into law in response to a number of financial panics, is the federal supervisor and regulator of all US bank holding companies, including financial holding companies, and state-chartered commercial banks that are members of the Federal Reserve System. The Federal Reserve also has responsibility for the international operations of state member banks and US bank holding companies, and the US operations of foreign banking organisations. The Federal Reserve has been assigned responsibilities for non-bank financial firms and financial market utilities that have been designated by the Financial Stability Oversight Council as systemically important. The Federal Reserve has assumed responsibility for the consolidated supervision of saving and loan holding companies and their subsidiaries. The Federal Reserve seeks primarily to promote safety and soundness, including compliance with laws and regulations.
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| FPC | The Financial Policy Committee is the UK's macroprudential oversight body. The FPC has been operating on an interim basis since 2011 and will be put onto a formal statutory footing in 2013. The FPC is a Sub-Committee of the Bank of England's Court of Directors. The interim FPC contributes to maintaining financial stability by identifying, monitoring and publicising risks to the stability of the financial system and advising action to reduce and mitigate them. The statutory FPC will assume these functions. The FPC's statutory objectives will be to exercise its functions with a view to (a) contributing to the achievement by the Bank of the Financial Stability Objective, and (b) subject to that, supporting the economic policy of the UK Government, including their objectives for growth and employment. The statutory FPC will have the power to give directions to the Financial Conduct Authority or the Prudential Regulation Authority with respect to the implementation of macroprudential measures. The FPC will be entitled to make recommendations within the Bank, to HM Treasury, to the Financial Conduct Authority and the Prudential Regulation Authority, or to other persons.
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| FSA | The Financial Services Authority is the single regulator for financial services in the UK. It is responsible for both microprudential supervision and the regulation of conduct of business. In 2013 the responsibility for the prudential supervision of banks, insurers and some investment firms will be formally transferred to the Prudential Regulation Authority. The Financial Conduct Authority will become responsible for conduct of business regulation. The FSA has already changed its operational structure to facilitate the evolution from one unitary regulator to the new 'twin peaks' approach.
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| FSB | The Financial Stability Board was established in April 2009 by the Leaders of the G20 countries as the successor to the Financial Stability Forum. The FSB brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. It coordinates at the international level the work of national financial authorities and international standard-setting bodies. It also develops and promotes the implementation of regulatory, supervisory and other financial sector policies.
The FSB's Key Attributes of Effective Resolution Regimes for Financial Institutions (2011) sets out the core elements that the FSB considers to be necessary for an effective resolution regime. The EU will meet G20 commitments to put in place an effective resolution regime through the adoption of the Recovery and Resolution Directive.
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| FSOC | The US Financial Stability Oversight Council, established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, is charged with identifying risks to the financial stability of the United States, promoting market discipline, and responding to emerging risks to the stability of the US financial system. The FSOC is a collaborative body chaired by the Secretary of the US Treasury that brings together the expertise of the federal financial regulators, an independent insurance expert appointed by the President, and state regulators. One of the key functions of the FSOC is to designate systemically important non-bank financial firms and financial market utilities for supervision by the Federal Reserve under enhanced prudential standards.
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| OCC | The Office of the Comptroller of the Currency is an independent office within the US Treasury Department. Its function is to charter, regulate and examine all national banks. The OCC performs regular reviews of national banks to ensure compliance with federal statutes and regulations. All national banks chartered by the OCC are also required to be members of the Federal Reserve and are subject to Federal Reserve oversight. The old Office of Thrift Supervision has become part of the OCC. The OCC also has responsibilities for federal branches of foreign banks.
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| PRA | The Prudential Regulation Authority, a subsidiary of the Bank of England, will become the UK's prudential regulator for banks, insurers, Lloyd's underwriters and arrangers, and designated investment firms in 2013. The PRA itself will have the power to designate certain firms with permission to "deal in investments as principal" for prudential supervision by the PRA. The PRA's general objective is to promote the safety and soundness of PRA-authorised persons. The PRA's insurance objective is to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders.
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| SRU | The Special Resolution Unit of the Bank of England plans for and implements resolutions of failing UK banks and building societies under the Special Resolution Regime established by the Banking Act 2009. The SRU works with the FSA on formulating policy for Recovery and Resolution Plans, which all UK deposit-takers are required to have in place. The Government plans to extend the Special Resolution Regime to systemic investment firms, parent undertakings of systemic investment firms and deposit-taking institutions, and central counterparties. Consideration is also being given to the position of other financial infrastructures and insurers.
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