## Session III: International and European Experience on Regulation, Supervision, and Resolution of Cross-Border Banks

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**Canonical URL:** [Session III: International and European Experience on Regulation, Supervision, and Resolution of Cross-Border Banks](https://www.imf.org/-/media/files/news/seminars/session-iii-juliedickson-presentation.pdf)

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### Role and design of the SSM
- SSM is Europe's single supervisor, created in 2014.
- Single supervisor for the 19 countries that use the euro.
- Described as fully resourced, implementing tough but fair supervision.
- Presented as an important development for financial stability in Europe.
- A single supervisor (and a single resolution authority) can facilitate cross border mergers in Europe.

### European cross-border banking under Banking Union
- To date no major pan-EU mergers.
- Possible reasons identified:
  - many banks need to address their own issues first
  - consolidation at the national level might be more appropriate initially
  - significant differences in business practices, language and culture
  - current EU rules affect movement of a bank's capital and liquidity among EU countries
  - banking union not complete (e.g. Deposit insurance)
  - Single rule book, but some regulatory uncertainty
- Observed trend: more joint ventures and cross participations as a sensible way to start.

### Supervisory perspectives on cross-border banking and mergers
- Any pan European takeovers or mergers would receive considerable attention by the SSM.
- The crisis highlighted the importance for supervisors to focus on:
  - plans for integration,
  - affordability,
  - impact on capital as a result of a merger/takeover.
- Warning: Merging 2 weak banks can create a bigger, weaker bank.

### Current issues in Europe regarding cross-border oversight
- Home-host supervision:
  - Systemic branch in SSM country overseen by non-SSM EU supervisor.
  - SSM response: full intensity model of branch supervision agreed in an MOU.
- European Commission (EC) proposal referenced: require a third country with operations in the EU to establish an EU holding company, overseen by the SSM.

### Consolidated supervision of complex groups
- Existence of global aspirational guidance/papers/principles (BCBS, IAIS, Joint Forum) about the need to effectively supervise groups.
- Frequently significant issues in meeting such guidance for supervisors globally.
- Effective supervision sometimes requires supervisory cooperation without a single supervisor responsible for the entire group.
- Some argue lack of powers over groups means supervision is more reactive than proactive.

### Example: group with global operations (insurance, some banking, real sector investments)
- Illustration included of a Canadian Holding Company (2015) with activities described as “Insurance, reinsurance, and investment management.”
- Geographic distribution labels shown: US Canada International Asia.
- Percentages shown related to insurance premiums: 63% of insurance premiums 14.4%13.4%9.2%.

### Conclusions and lessons
- Recommendation for African authorities:
  - learn the lessons of others (such as lessons learned in the EU);
  - learn the challenges associated with complex structures;
  - by doing so, they will be better positioned.

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_Source: https://www.imf.org/-/media/files/news/seminars/session-iii-juliedickson-presentation.pdf_