The Commission of European Communities Issues a Communication for Cross-Border Crisis Management in the Banking Sector
The Commission of the European Communities has issued a communication titled An EU Framework for Cross-Border Crisis Management in the Banking Sector (communication). The communication came from a wide recognition that the global financial crisis demonstrated a lack of an effectice crisis management for cross-border financial institutions. The EU needs to build a resolution regime that would ensure that all competent authorities effectively coordinate their actions and have the appropriate tools for intervening quickly to manage the failure of a bank, with the objective of minimising the need for States to resort to the kind of exceptional measures that have been necessary in this crisis.
The communication proposes a fundamental reform of the regulation and supervision of financial markets to address the failings exposed by the banking crisis. Measures have already been taken to upgrade deposit insurance, strengthen capital requirements and reform the EU supervisory infrastructure: measures that are essential for a more robust framework for prudential supervision and financial stability. These reforms must be complemented by a clear framework that will, in future, enable authorities to stabilise and control the systemic impact of failing cross-border financial institutions.
The resolution aspect of the communication was presented along with the early intervention and insolvency section. The resultion framework proposed covered measures taken by national resolution authorities to manage a crisis in a banking institution, to contain its impact on financial stability and, where appropriate, to facilitate an orderly winding up of the whole or parts of the institution. These measures take place outside the framework of banking supervision, and may be taken by authorities other than supervisors, although it is by no means precluded that supervisors might be involved.
Originally Published:
20/10/2009