## _cr1374 - 2013. The views expressed in this document are those of the staff team and do not necessarily reflect

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### Executive Summary — achievements, constraints, and priorities
- Achievements and outputs
  - EBA produced 23 draft technical standards, the large majority related to capital.
  - Crisis-driven priorities included stress test and recapitalization exercises.
- Operational constraints and reputational risk
  - EBA may not collect data directly from financial institutions, nor verify correctness and integrity of data provided by national authorities; this affected stress testing and risk dashboard activities.
  - Cumbersome decision-making processes and an inflexible staff budget under EU financial rules contributed to delays and data inaccuracies, creating reputational risk.
- Recommended priority areas
  - Concentrate increasingly on supervisory convergence and quality assurance tasks.
  - Advance and accelerate convergence on Pillar 2 practices (common methodologies for supervisory review and evaluation process).
  - Continue work on consistency of Risk Weighted Assets (RWA), including follow-up with Guidelines and perhaps Regulatory Technical Standards (RTS); align with BCBS Level 3 exercises.
- Interaction with the Single Supervisory Mechanism (SSM)
  - Creation of the SSM brings new urgency to EBA’s supervisory convergence role.
  - EBA should work closely with the ECB to align the envisaged European Supervisory Handbook with ECB implementing SSM procedures.
- Transparency and data reliability
  - Prioritize strengthening transparency and reliability of data through enhanced quality assurance, disclosure of granular asset quality information, and expanded audits.

### I. Introduction and scope, and review methodology
- Review context
  - Part of the 2012 Financial Sector Assessment Program (FSAP) assessment of the EU.
  - Analysis based on laws, regulations, and supervisory requirements and practices as of December 12, 2012.
- Evidence and team
  - Team received responses to a detailed questionnaire from EBA and met with EBA on December 7, 2012.
  - Discussions with EC, other ESAs, some NSAs, ECB, legal firms, and market participants complemented analysis.
  - Team members: Fabiana Melo and Nadege Jassaud, Monetary and Capital Markets Department, IMF.
  - Reliance on interviews, self-assessment and internal procedures documents; no access to internal minutes and work papers.

### Banking sector structure and key metrics
- Size, role, and employment
  - Banks account for 3.6 times the EU GDP in size and 7 percent in revenues (€900 billion in 2010; source: FBE).
  - Banks employ 1.5 percent of the EU workforce (three million staff).
  - Sector funds 85 percent of corporates versus 30 to 50 percent in the United States.
- Structural developments and indicators (2007–2012)
  - Number of credit institutions decreased by 5 percent, mainly in Netherlands, Germany and France.
  - There were 7,913 EU credit institutions at end–October 2012.
  - Nonperforming loans: 8.4 percent of gross loans in June 2012, versus 2.6 percent in December 2007 (based on a sample of 90 largest EU banks using Bloomberg data).
  - Tier 1 ratio of EU banks exceeded 10 percent at end–June 2012, versus around 7 percent in December 2008 (Tier 1 ratio excluding hybrid instruments—proxy of core Tier 1 ratio—based on EBA data, 57 banks with not all banks reporting all data for all periods).
  - More than 87 EU cross-border banking groups, of which 40 with significant operations outside their home country (44 in 2011).

### EBA governance, decision-making, and resources
- Board of Supervisors (BoS)
  - Composed of heads of the 27 national supervisory authorities (NSAs), with observers from EC, ESRB, ECB, ESMA and EIOPA.
  - Only Heads of NSAs, or their alternates, have the right to vote.
  - EBA Chairperson prepares BoS work and participates without voting rights.
  - In 2012 BoS met seven times and had four conference calls (six and 10 times respectively in 2011).
  - One BoS member attended just one physical meeting in 2012, infringing Article 40, 1 (b) of the EBA Regulation requesting a minimum of two attendances.
- Voting and independence
  - One vote per member; adoption of technical standards requires qualified majority.
  - Article 42 requires voting members to act independently and objectively in the sole interest of the Union, though alliances or concerted decisions may still happen.
  - Voting member cannot vote on matters with a material personal conflict, but may vote on matters concerning its own competent authority.
- Management Board and executive appointments
  - MB composed of six members selected from the BoS, chaired by the EBA Chairperson; Chairperson has casting vote in event of tie; quorum at least two-thirds of members with right to vote.
  - EBA Executive Director and an EC representative participate in MB meetings with no voting rights.
  - Chairperson and Executive Director appointed by BoS after open selection for five-year terms with possible reappointment for one more term; EP may object to Chairperson before taking office.
  - Chairperson may be removed from office only by the European Parliament following a BoS decision; Executive Director appointed by BoS after EP confirmation and may be removed only upon BoS decision.
- Staffing and budget constraints
  - Staff growth: from 58 to 95 between May 2011 and December 2012.
  - Staff composition as reported (Source: EBA):
    - 2011: Temporary agents 46; Contractual agents 8; Seconded national experts 4; Total 58
    - December 2012: Temporary agents 68; Contractual agents 12; Seconded national experts 15; Total 95
    - 2013 Planned: Temporary agents 93; Contractual agents 15; Seconded national experts 15; Total 123
  - Staff types: 68 temporary agents, 12 contract agents and 15 seconded national experts (as of December 2012).
  - Staff training: 2011 average one day per staff member; 2012 average 1.5 days per staff member.
  - Budget financed 40 percent from the EC Section of the General Budget of the EU and 60 percent from obligatory contributions from the NSAs.
  - Budget process and EU financial rules constrain staffing flexibility; new tasks trigger staffing only after publication in the Official Journal; staff and other expenses are not fungible.
  - Example: recovery plans tasks estimated to require 16 new staff per EBA, but hiring awaits final publication of the Directive.

### Data access, quality, and reputational risk
- Legal and practical constraints
  - ESAs Regulation indicates ESAs should access all necessary information via European and national counterparties, but this provision has not been used in practice.
  - Where information is not available from NSAs, EBA can address a duly justified request to other institutions or financial institutions themselves, but always through respective NSAs; this avenue has not been used in practice.
  - In at least one assessment (Financial Conglomerate Directive handling), EBA received partial answers from NSAs and did not further use powers of data collection.
- Operational impacts
  - EBA cannot collect data directly from financial institutions and must rely on NSAs for first-level data control and quality assurance.
  - Requiring BoS votes to provide data for EBA studies may hinder timeliness.
  - If NSAs do not ensure correctness and data integrity, EBA faces reputational risk when using and publishing the information.

### Regulatory role, Single Rulebook, and internal rulemaking
- Regulatory remit and limits
  - EBA drafts technical standards (Level 2) and Guidelines (Level 3); Level 2 instruments become binding only once endorsed by the Commission.
  - EBA participates in Level 1 process by giving Opinions on EC rulemaking proposals; Opinions are not binding nor require a response.
  - Example: EBA sent two Opinions expressing concerns on own funds definition and application of transitional floors in CRR/CRDIV package.
  - Observation: detailed Level 1 legislation reduces scope for Level 2 regulation and hinders timely prudential adjustments.
- Single Rulebook progress
  - Draft Technical Standards focus mainly on CRR/CRDIV (own funds, credit risk, market risk).
  - Only component endorsed so far: Regulatory Technical Standards on Capital Requirements for Central Counterparties (submitted September 2012; endorsed by Commission on 19 December 2012).
  - Tight timetables for CRD-related work result in narrow consultation periods; Parliament and Council can object to or block Technical Standards.

### Enhancing supervisory convergence and tools
- EBA mandate and tools
  - Mandate: promote convergence of supervisory practices to a high standard across member states for financial stability and single market objectives.
  - Tools: training, harmonizing reporting, data sharing, participation in colleges, conducting peer reviews.
- Current effectiveness and activities
  - Several EBA sub-groups work on convergence, but beyond issuing Guidelines relatively little has been accomplished due to divergence and resistance from competent authorities.
  - Standing Committee on Oversight and Practices (SCOP) exchanges practices; sub-groups include Home-host and Colleges and Risk Assessment Systems (working on Guidelines for a common SREP).
  - Training activity: 2011 organized 7 road shows and 9 seminars; 2012 organized 13 seminars.
  - Guidelines issued include supervisory approval of AMA model changes; Stressed VaR and IRC modeling for IMA; data collection on high earners and remuneration benchmarking; suitability of management body members and key function holders.
- Peer review framework
  - May 2011: decision to establish a Review Panel to assess convergence and monitor practices, resources, and governance.
  - EBA methodology for peer review adopted by BoS in June 2012; revised methodology pending publication; current methodology is CEBS 2009 update.
  - Peer review process based on self-assessments by national supervisors against “clear and objective assessment criteria.”
  - Recent peer reviews: Stress Testing Guidelines (initiated summer 2012; due 2013) and Guidelines on Concentration Risk under Pillar 2.

### Supervisory handbook, colleges, and cross-border supervision
- Single Supervisory Handbook
  - EBA intends to develop a Single Supervisory Handbook (work plan for 2013) to unify supervisory methodologies and avoid fragmentation.
  - Handbook content: papers summarizing best practices and Guidelines; focus on interpretation of standards and orientation on substantiating risk assessments rather than detailed procedures.
- Colleges of supervisors
  - CRD 2 requires colleges for all cross-border banking groups (applicable from December 31, 2010).
  - EBA mapping: 110 cross-border banks in 2011 and 87 in 2012; EBA focuses on 40 largest colleges.
  - Colleges should perform joint risk assessments and joint decisions agreed by all EEA supervisors; practice shows variety in effectiveness and granularity.
  - EBA role as facilitator (Article 21): promote and monitor efficient, effective and consistent functioning of colleges; may develop draft Technical Standards on operational functioning of colleges; establishing a central system to share college-relevant information.
- Quality of joint assessments and decisions (key observations)
  - Joint decisions sometimes are only one page listing individual capital requirements without adequate evidence and analysis.
  - Individual capital requirements were not always consistent with risk assessment; some authorities imposed higher capital requirements on entities with best risk profiles and highest profitability within a group.
  - No formal mediation requests made despite areas of disagreement; formal mediation could have been used where no joint decisions were reached.
  - EBA should strengthen leadership in cross-border colleges and use soft powers (“name and shame”), push for mediation, and ensure action-oriented, forward-looking conclusions.
- Cooperation with third-country supervisors
  - Cooperation is work in progress; EBA participation in some colleges for EEA parts of groups with third-country parents appears exceptional.
  - Some third-country authorities have not granted full access to EBA representatives; some object to granular data sharing and are reluctant to attend crisis management colleges.

### EU-wide stress testing, Risk Dashboard, and ESRB contribution
- Stress tests and recapitalization
  - EBA strengthened stress testing procedures after 2010; 2011 solvency stress testing and recapitalization exercises had more consistency checks and transparency.
  - Recapitalization exercise recommended achievement of 9 percent core Tier 1 capital by end–June 2012, after establishing a sovereign buffer based on market-implied valuation of government securities holdings.
  - A few banks under restructuring and recapitalization programs did not achieve the target on time.
- Risk Dashboard
  - Not public; based on Key Risk Indicators (KRI): 53 ratios reported quarterly by EU national authorities, covering 57 EU banks from 20 EEA countries.
  - KRI definitions are homogeneous and consistent with COREP and FINREP where adopted.
  - Banks in sample cover at least 50 per cent of each national banking sector; time-series incomplete and collected on a best effort basis.
  - EBA carries out consistency checks, but data quality responsibility rests with national authorities.
- Contribution to ESRB
  - EBA participates in ESRB General Board, Steering Committee, Advisory Technical Committee (ATC), ATC Expert Groups, and two permanent Working Groups.
  - EBA collects bank-specific information for ESRB expert groups and provides bottom-up assessments of risks and vulnerabilities.
  - Follow-up on ESRB Recommendations: by end 2013 EBA must adopt Guidelines to NSAs on capital measures relating to FX lending supervisory practices (drafted and to be approved by BoS in February 2013). ESRB Recommendation on dollar denominated funding includes regular data collection which ESRB collects from NSAs; EBA is engaging to receive notifications and establish its own account.

### Supervisory reporting, quality assurance, and Pillar 3 disclosure
- Supervisory reporting framework
  - EBA finalizing draft Implementing Technical Standards on supervisory reporting covering COREP, FINREP, large exposures, liquidity and leverage ratios.
  - Banks will report to NSAs, which will forward individual data to EBA; EBA will become a hub of bank-specific data.
  - Initial coverage: on COREP, FINREP and large exposures reporting will cover 100-200 banks in the first phase; leverage and liquidity ratio reporting covers all banks.
  - EBA drafting an RTS specifying Basel 3 own funds disclosure templates; no decision yet on public dissemination of bank-specific data collected through new reporting framework.
  - EBA published stress test results in 2010 and 2011; in 2011 a user-friendly tool provided access to more than 3000 data points for each bank disclosed.
- Quality assurance and Pillar 3
  - EBA should:
    - (i) enhance the quality assurance process;
    - (ii) promote disclosure of granular asset quality information (including collateral and RWA calculations);
    - (iii) expand depth and coverage of data audits.
  - EBA should issue Guidelines for supervisors on best practices for asset quality reviews and push for enhanced comparability and completeness of Pillar 3 reports.

### Crisis management, binding powers, recovery and resolution
- Binding powers
  - EBA can issue Recommendations or binding Decisions directly to NSAs only in limited cases:
    - where an NSA is incorrectly applying EU law (breach of EU law, Article 17);
    - where there is disagreement between national authorities in cross-border situations (mediation, Articles 19 and 20);
    - in emergency situations declared by the Council (Article 18).
  - EBA can take Decisions directly applicable to financial institutions as last resort only if the NSA has not complied and only when EU law applies directly to a financial institution (Regulation and not Directive).
  - No formal case has materialized so far.
- Crisis management preparedness
  - EBA issued a Crisis Management manual and internal crisis management procedure guide in 2012.
  - EBA began attending Crisis Management Groups for a number of major cross-border banking groups.
  - May 2012: published a discussion paper containing a template for a Recovery Plan.
  - EBA coordination role will expand with adoption of the Directive on Recovery and Resolution Planning; EBA will coordinate and design resolution plans for cross-border group entities and emergency procedures.

### Consumer protection, financial innovation, and cross-sector coordination
- Consumer protection mandate and resourcing
  - Under Article 9(1) EBA tasked with collecting, analyzing and reporting on consumer trends; reviewing and coordinating financial literacy; developing training standards; contributing to common disclosure rules.
  - Consumer Protection Unit set up in February 2012 had only one person and reports to the Executive Director; more staff and expertise needed.
  - 2012 work included mortgage market analysis and preparatory work on two Guidelines: responsible lending (based on FSB Principles) and treatment of borrowers in payment difficulties.
- Financial innovation
  - EBA established a Standing Committee on Financial Innovation (SCFI, later SCConFin).
  - Workstreams examined Exchange Traded Funds, Contracts for Differences, and Structured Products.
  - Recommendation: regulatory work on financial innovation should be assessed for impact on financial stability and consumers and avoid duplication with securities arena work.
- Joint Committee of ESAs
  - Established January 1, 2011 (Articles 54–57) for cross-sector cooperation among the three ESAs.
  - Mandated areas include supervision of financial conglomerates, accounting and auditing consistency, micro-prudential analyses, risks for financial stability, retail investment products, AML measures, information exchange with ESRB.
  - Chairmanship rotates; Joint Committee had dedicated staff (for EBA one FTE in 2011 and two FTE in 2012).

### Observed challenges at colleges and policy implications (excerpt from paragraph 39)
- Quality and consistency of joint assessments and decisions
  - Most colleges have developed uniform approaches but with different granularity and consistency.
  - Joint decisions sometimes are only one page listing individual capital requirements without adequate evidence and analysis.
  - Individual capital requirements not always consistent with risk assessments; higher capital sometimes imposed on entities with the best risk profile and highest profitability in the group.
  - No formal mediation requests were made despite disagreements; formal mediation could have been used.
- EBA role and actions recommended for colleges
  - EBA should strengthen leadership in cross-border supervisory colleges, be assertive to ensure level playing field across EU countries (inside and outside SSM), and use soft powers (“name and shame”) to foster effective multilateral exchanges and push for mediation where needed.
  - EBA should participate proactively in core colleges of EU banking groups with activities outside the EU and cover larger non-EU international groups active in Europe.

### Summary of selected recommendations
A. Governance
- Consider giving representatives of some other EU institutions (except the Commission), and possibly the EBA Chairperson, a vote on the Supervisory Board.
- Strengthen powers of the Management Board with more delegated powers from the BoS or create a permanent Executive Board composed of independent representatives.
- Suspend votes of members not complying with Article 40; introduce a mechanism of written procedure to incentivize correct representation.
- Allocate more resources to the EBA and consider more budget flexibility.

B. Regulatory and supervisory actions
- Issue Guidelines for supervisors on asset quality reviews and push to enhance comparability and completeness of Pillar 3 reports.
- Accelerate convergence on Pillar 2 practices and harmonize RWA treatment, aligning with BCBS Level 3 exercises and following up with Guidelines or RTS.
- Encourage joint onsite supervision and resume thematic peer reviews.
- Implement peer reviews on adequacy of supervisory resources and governance arrangements.
- Strengthen EBA role in cross-border supervisory colleges and extend engagement to larger international groups active in Europe.
- Ensure Guidelines are observed and use soft powers to foster genuine joint decisions and mediation.
- Work closely with the ECB so SSM procedures can build on EBA Guidelines and the Supervisory Handbook.

C. Oversight and data quality
- Strengthen transparency and reliability of data by:
  - (i) enhancing the quality assurance process;
  - (ii) promoting disclosure of granular asset quality information;
  - (iii) expanding the depth and coverage of audits.
- Ensure Pillar 3 reports are enhanced and harmonized.

D. Consumer protection and cross-sector
- Organize EBA consumer protection function with more staff and knowledge building.
- Focus financial innovation work on consumer protection and avoid duplication with securities sector work.

*International Monetary Fund staff report excerpt (2013).*

### 2013. The views expressed in this document are those of the staff team and do not necessarily reflect

### _cr1374 - 2013. The views expressed in this document are those of the staff team and do not necessarily reflect

### Executive Summary
- Achievements and constraints
  - The European Banking Authority (EBA) had significant achievements in its first two years despite limited resources.
  - Crisis-driven priorities (stress test and recapitalization exercises) may have diverted resources from convergence and quality-of-supervision tasks.
  - The EBA produced 23 draft technical standards, the large majority related to capital.
- Operational constraints and reputational risk
  - The EBA may not collect data directly from financial institutions, nor verify correctness and integrity of data provided by national authorities; this affected stress testing and risk dashboard activities.
  - Cumbersome decision-making processes and an inflexible staff budget under EU financial rules contributed to delays and data inaccuracies, creating reputational risk.
- Recommended priority areas
  - Concentrate increasingly on supervisory convergence and quality assurance tasks.
  - Advance and accelerate convergence on Pillar 2 practices (common methodologies for supervisory review and evaluation process).
  - Continue work on consistency of Risk Weighted Assets (RWA), including follow-up with Guidelines and perhaps Regulatory Technical Standards (RTS); align with BCBS Level 3 exercises.
- Single Supervisory Mechanism (SSM) interaction
  - Creation of the SSM brings new urgency to EBA’s supervisory convergence role.
  - The ECB implementing SSM procedures may front run some aspects of the envisaged European Supervisory Handbook; EBA should work closely with the ECB to align handbook content applicable across the EU.
- Cross-country cooperation and supervisory colleges
  - Foster more joint supervisory activities (including joint onsite inspections) via colleges of supervisors; resume thematic peer reviews.
  - Implement peer reviews on adequacy of supervisory resources and governance arrangements of supervisory authorities.
  - Use soft powers (“name and shame”) to foster effective multilateral exchanges, ensure genuine joint decisions, and push for mediation when no joint decision can be reached.
  - EBA should be assertive in colleges to ensure a level playing field across EU countries (between in and out the SSM).
- Transparency and data reliability
  - Prioritize strengthening transparency and reliability of data.
  - Enhance quality assurance processes; promote disclosure of granular asset quality information; expand depth and coverage of audits.
  - Issue Guidelines for supervisors on best practices for asset quality reviews and push for enhanced comparability and completeness of Pillar 3 reports.
- Role in external relations
  - The EBA will have a role in the EU’s relationships with the outside world.

### I. Introduction and Scope
- Review context and methodology
  - The review is part of the 2012 Financial Sector Assessment Program (FSAP) assessment of the EU.
  - Analysis based on laws, regulations, and supervisory requirements and practices as of December 12, 2012.
  - The team received responses to a detailed questionnaire provided by EBA and met with the EBA on December 7, 2012.
  - Analysis complemented by discussions with the European Commission (EC), other European Supervisory Authorities, some national supervisory authorities (NSAs), ECB, legal firms, and market participants.
  - The team comprised Fabiana Melo and Nadege Jassaud, Monetary and Capital Markets Department, IMF.
  - The team relied on interviews, self assessment and internal procedures documents, but did not have access to internal minutes and work papers.

### Banking Sector Structure (as presented)
- Size and economic role
  - Banks account for 3.6 times the EU GDP in size and 7 percent in revenues (€900 billion in 2010; source: FBE).
  - Banks employ 1.5 percent of the EU workforce (three million staff).
  - The sector grants 85 percent of the funding to corporates, against 30 to 50 percent in the United States.
- Structural developments and indicators
  - Over 2007–2012 some consolidation occurred: the number of credit institutions decreased by 5 percent, mainly in Netherlands, Germany and France, due to mergers, restructuration or closures.
  - There were 7,913 EU credit institutions at end–October 2012.
  - Nonperforming loans account for 8.4 percent of gross loans in June 2012, against 2.6 percent in December 2007 (based on a sample of 90 largest EU banks using Bloomberg data).
  - Capital buffers increased between December 2008 and June 2012; the Tier 1 ratio of EU banks exceeded 10 percent at end–June 2012, against around 7 percent in December 2008 (Tier 1 ratio excluding hybrid instruments—proxy of core Tier 1 ratio—based on EBA data, 57 banks with not all banks reporting all data for all periods).
  - There are more than 87 EU cross-border banking groups, of which 40 with significant operations outside of their home country (44 in 2011). In the absence of a comprehensive list, EBA staff rely on what competent authorities reported.

### II. EBA Governance
- Board of Supervisors (BoS) composition and meetings
  - BoS composed of heads of the 27 national supervisory authorities (NSAs), with observers from the EC, ESRB, ECB, ESMA and EIOPA.
  - Only Heads of NSAs, or their alternates, have the right to vote.
  - EBA Chairperson prepares the work of the BoS and participates in meetings but has no voting right.
  - During 2012, the BoS met seven times and had four conference calls (six and 10 times respectively in 2011).
  - Only one BoS member attended just one physical meeting in 2012, infringing Article 40, 1 (b) of the EBA Regulation requesting a minimum of two attendances.
- Voting and decision-making
  - One vote per member; decisions require either simple or qualified majority depending on the matter.
  - Adoption of technical standards requires qualified majority.
  - The EBA Regulation (Article 42) requires voting members to act independently and objectively in the sole interest of the Union; alliances or concerted decisions may still happen.
  - A voting member cannot vote on a matter where he/she has a material personal conflict, but this does not prevent voting on matters concerning its own competent authority.
- Concerns with Banking Union and SSM
  - Within the Banking Union, countries not participating in the SSM fear BoS decision-making may allow SSM members’ positions to prevail; at the time of the FSAP no agreement had been reached on voting rights.
  - ECOFIN Council agreement of December 13 (noted in the report) provides that decisions on breaches of EU law and on binding mediation will be taken by the BoS upon proposal by the panel, by a double majority (majority of the participating and the non-participating member states). For regulatory decisions of a horizontal nature the principle of qualified majority is combined with a requirement for a double simple majority. The Council compromise is still subject to discussions with the European Parliament expected to conclude early in 2013.
  - A possible institutional solution proposed: introduce an independent and restricted decision making body with decisions subject to a veto power of the BoS.
- Relationship with the European Commission
  - Procedure for adoption of technical standards allows EC objections on EU-wide interest grounds within three months; if EC does not endorse a draft, it sends it back with reasons; EBA has six weeks to amend and resubmit a formal opinion. If inconsistent with EC proposed amendments, EC can make its own amendments and adopt it.
  - No example of undue interference by the EC was observed in the short review period.
- Management Board (MB) and executive appointments
  - MB composed of six members selected from the BoS, chaired by the EBA Chairperson; decisions by majority of members present; Chairperson has casting vote in event of tie; quorum is at least two-thirds of members with right to vote.
  - EBA Executive Director and an EC representative participate in MB meetings with no voting rights.
  - MB focuses on managerial aspects such as annual work program, budget and resources.
  - Chairperson and Executive Director appointed by the BoS following an open selection procedure for five-year terms with possibility of reappointment for one more term.
  - Before Chairperson takes up duties, European Parliament (EP) may object to the designation.
  - Chairperson may be removed from office only by the European Parliament following a decision of the BoS.
  - Executive Director is appointed by the BoS after confirmation of the EP and may be removed only upon a decision of the BoS.

### Key Findings on EBA Operations and Priorities
- Regulatory output and crisis focus
  - 23 draft technical standards produced, most related to capital.
  - Crisis-related activities (stress tests, recapitalization) were prioritized and resource-intensive.
- Data collection and verification limitations
  - EBA cannot collect data directly from financial institutions nor verify the data provided by NSAs for stress tests and risk dashboards; this creates reputational risk and potential data inaccuracies.
- Supervisory convergence and RWA consistency
  - Initial work identified divergences in application of Internal Ratings Based (IRB) models, differences in interpretation/implementation of the regulatory framework, and dispersion across banks in the gap between expected losses on defaulted and non-defaulted assets.
  - Work on RWA consistency is crucial for supervisory convergence and a level playing field.
- Recommendations for supervisory practices
  - Issue Guidelines (and perhaps RTS) to ensure consistency in RWA and IRB model application.
  - Resume thematic peer reviews and implement peer reviews on adequacy of supervisory resources and governance.
  - Encourage joint supervisory activities and joint onsite inspections through colleges of supervisors.
  - EBA should participate in and be proactive in colleges, including core colleges of EU banking groups with activities outside the EU, and cover larger non-EU international groups active in Europe.

*International Monetary Fund staff report excerpt (2013).*

### 12. The EBA is accountable to the European Parliament and the Council. In

### 12. The EBA is accountable to the European Parliament and the Council

### Accountability, stakeholder consultation, and governance findings
- Article 43: EBA’s Board of Supervisors (BoS) reports its work program to the European Parliament, Council and Commission each year and issues an annual report on its activities and on the performance of the Chairperson’s duties.
- Article 50 of the EBA Regulation:
  - Provides for EBA’s Chairperson to be invited to the European Parliament and Council to make a statement and to answer questions put by members of the European Parliament.
  - Provides for the Chairperson to report in writing on EBA’s main activities when requested.
- Banking Stakeholder Group:
  - Composed of 30 members appointed to represent in balanced proportions credit and investment institutions operating in the Union, their employees’ representatives, consumers and other users of financial services such as SMEs.
  - Consulted on Regulatory Technical Standards, Implementing Technical Standards, Guidelines and Recommendations, to the extent these do not concern individual financial institutions.
- Governance recommendations from past IMF work (EFFE May 2011) that remain valid:
  - To mitigate national interests, representatives of some other EU institutions (except the Commission), and possibly the EBA Chairperson, could have a vote on the Supervisory Board.
  - The powers of the Management Board could be further strengthened, with more delegated powers from the Board of Supervisors (BoS).
  - Example proposal: set up a permanent Executive Board composed of independent representatives.
- Representation and decision-making at the BoS:
  - Preserve the level of seniority at the BoS.
  - Members not complying with Article 40 of the EBA Regulation should have their votes suspended.
  - Introduce a mechanism of written procedure for all BoS representatives who are not Board of Supervisors’ members to incentivize right representation.

### Data access and risks
- Legal provision: Regulation establishing the ESAs indicates ESAs should be able to access, via European and national counterparties, all information necessary to conduct their activities; this provision has not been used in practice.
- Current practice:
  - Where information is not available or not made available by NSAs, the EBA can address a duly justified and reasoned request to other institutions or financial institutions themselves, but always through the respective NSAs. This avenue has not been used in practice.
  - In at least one assessment (NSAs’ handling regarding the Financial Conglomerate Directive), the EBA received partial answers from NSAs and did not further use its powers of data collection.
- Reputational and operational risks from lack of direct access:
  - Necessity to go through NSAs for detailed supervisory data causes delays that negatively affect oversight activities (stress tests and risk assessment).
  - Requiring a vote from the BoS to provide data for particular EBA studies may hinder timeliness.
  - EBA lacks powers to collect data directly from financial institutions and must rely on NSAs for first-level data control and quality assurance.
  - If NSAs do not ensure correctness and data integrity, the EBA incurs reputational risk when using and publishing the information.

### EBA staff, resources, and budget
- Staffing growth and composition:
  - EBA staff increased from 58 to 95 between May 2011 and December 2012.
  - Current senior support structure: Chairperson and Executive Director supported by three Directors and seven Heads of units.
  - Staff composition: 68 temporary agents, 12 contract agents and 15 seconded national experts.
- Staff training:
  - 2011: on average one day per staff member.
  - 2012: on average 1.5 days per staff member.
- Reported headcount by category and year (Source: EBA):
  - 2011: Temporary agents 46; Contractual agents 8; Seconded national experts 4; Total 58
  - December 2012: Temporary agents 68; Contractual agents 12; Seconded national experts 15; Total 95
  - 2013 Planned: Temporary agents 93; Contractual agents 15; Seconded national experts 15; Total 123
- Budget structure and constraints:
  - EBA’s budget is part of the EC’s overall budget.
  - Funding composition: 40 percent from the EC Section of the General Budget of the EU and 60 percent from obligatory contributions from the NSAs.
  - Consequences:
    - Contributions from NSAs may impede EBA independence.
    - Budget process subordination to the EC makes EBA staffing policy subject to EU agency rules (salaries and levels of seniority dictated by EU rules; budget determined by the EU Budgetary Authority—Council and European Parliament—to a great level of detail).
    - New tasks from regulations should in theory come with immediate additional budget, but EC budget rules allocate new staff only when the new regulation is published in the Official Journal.
    - Example: new tasks in terms of recovery plans will require 16 new staff according to the EBA, but EBA must await final publication of the Directive before budget/staffing adjustments occur.
    - Staff and other expenses are not fungible; EBA cannot reallocate budgetary resources freely across projects.
- Use of NSA staff and implications:
  - NSA participation in technical working groups is helpful but should not be relied upon excessively.
  - Standing and Technical Committees (staffed by NSAs) are significant complements: currently four Standing Committees and 20 sub-groups.
  - NSAs second staff for defined periods, sometimes for very short thematic projects.
  - Risks:
    - Work may reflect national-based membership due to greater NSA resources.
    - Work continuity may become overly dependent on availability of NSAs.
- Options and medium-term considerations for funding and staffing flexibility:
  - Advocate for more flexibility in staffing while taking a medium-term view, particularly considering establishment of the SSM.
  - One option: a separate and specific budget line in the overall EU Budget, outside the Commission’s funding (analogous note: the European Data Protection Supervisor is funded on the general budget of the EU).
  - Another option: explore additional sources of funding, e.g., fees on financial institutions.
  - Planning of staff must consider medium-term shifts from establishment of the SSM: as ECB is given supervisory role for euro area member states, EBA mandate should provide for necessary adjustments and possible refocusing on specific core tasks.

### Regulatory and supervisory actions — regulatory framework and processes
- EBA’s regulatory role and limitations:
  - EBA is a regulatory agency empowered to draft technical standards (Level 2) and Guidelines (Level 3).
  - Level 2 instruments become binding only once endorsed by the Commission.
  - EBA participates in the Level 1 process by giving Opinions on EC rulemaking proposals; such Opinions are not binding nor require a response.
  - Recent actions: EBA sent two Opinions expressing concerns regarding own funds definition and the application of transitional floors to capital requirements, suggesting amendments to the Capital Requirements Regulation (CRR) in the CRR/CRDIV legislative package.
  - Observation: Level 1 legislation’s technical detail reduces scope for Level 2 regulation and hinders timely adjustment of prudential rules.
- Internal rulemaking procedures:
  - EBA has established internal procedures for rulemaking and consultation aligned with other ESAs, covering development, drafting, cost-benefit analysis and impact assessment, consultation, role of the Banking Stakeholder Group, submission to the EC, publication, and analysis of proposed EC amendments.
  - Policy Analysis and Coordination Unit (PAC):
    - Responsible for general coordination of regulatory activities within EBA and with external stakeholders.
    - Staff structure: PAC has nine staff; regulation activities are conducted by some 25 people in three Units under the Regulation Department.
    - PAC includes a legal analysis team and an impact assessment team.
  - Public statement on consultation practices: EBA DC 57.
  - Internal guidance exists (quality criteria for drafting Technical Standards; templates for documents).

### Single Rulebook progress and challenges
- Concept and objectives:
  - Single Rulebook: technical rules defined at EU level and adopted through EU regulations to ensure direct applicability to all banks, remove local rule layers, reduce compliance costs, limit regulatory arbitrage, and prevent loss of competitiveness of EU-wide groups.
- Status of implementation:
  - Draft Technical Standards focus mostly on CRR/CRDIV framework (own funds, credit risk, market risk).
  - Only component endorsed so far: Regulatory Technical Standards on Capital Requirements for Central Counterparties.
    - EBA submitted draft Technical Standards to the Commission in September 2012; endorsed by the Commission on 19 December 2012.
- Procedural challenges:
  - Very tight timetables for CRD-related regulatory work result in narrow consultation periods.
  - Parliament and Council retain power to object to or block Technical Standards, raising concerns about timely adoption (governance constraints noted).

### Enhancing supervisory convergence and tools
- EBA mandate: promote convergence of supervisory practices to a high standard across member states to serve financial stability and single market objectives.
- Tools to strengthen convergence: training programs, harmonizing reporting, data sharing and disclosure, participation in colleges, conducting peer reviews.
- Current effectiveness:
  - Several EBA sub-groups work on convergence, but beyond issuing Guidelines relatively little has been accomplished, mainly due to divergence in national practices and resistance from competent authorities.
  - Standing Committee on Oversight and Practices (SCOP) exchanges practices; sub-groups include Home-host and Colleges and Risk Assessment Systems (working on Guidelines for a common SREP).
  - Implementation and Supervisory Practices sub-committee focused on convergence and harmonization.
- Training and cross-sector programs:
  - EBA organizes training for NSAs and other ESAs to harmonize understanding and foster common supervisory culture.
  - 2011: organized 7 road shows and 9 seminars.
  - 2012: organized 13 seminars.
- Guidelines issued to harmonize practices include:
  - Recommendations on implementation of EU regulations.
  - Best practices on issues covered exclusively by national legislation.
  - Examples: Guidelines on supervisory approval of changes in AMA models; Guidelines on Stressed Value-At-Risk (Stressed VaR) and Incremental Default and Migration Risk Charge (IRC) modeling for IMA; Guidelines on data collection on high earners and remuneration benchmarking; Guidelines on assessment of suitability of management body members and key function holders (fit and proper criteria).
- Peer reviews:
  - May 2011: EBA adopted a decision to establish a Review Panel to assess convergence in implementation and supervisory provisions and monitor supervisory practices, resources adequacy, and governance arrangements.
  - EBA methodology for peer review adopted by Board of Supervisors in June 2012; revised methodology yet to be published; current methodology is the CEBS 2009 update.
  - Peer review process: review by the Panel based on self-assessments by national supervisors against “clear and objective assessment criteria.”
  - Recent activity: summer 2012 initiated a Peer Review of its Stress Testing Guidelines (due to be completed in 2013); a peer review on EBA’s Guidelines on Concentration Risk under Pillar 2 was started.

### Future role: supervisory handbook and strengthening colleges
- Context:
  - Establishment of the ECB as single supervisor for euro area countries raises questions about EBA’s supervisory convergence mandate and possible front-running/overlap with EBA activities.
- EBA response and plans:
  - Intention to develop a Single Supervisory Handbook (per EBA work plan for 2013) to unify supervisory methodologies and avoid fragmentation of the EU Single Market.
  - Handbook content concept:
    - Composed of papers summarizing best practices and Guidelines.
    - Emphasis on interpretation of existing standards and orientation on how supervisors can substantiate their risk assessments rather than detailed procedures.
    - Based on EBA stock-takings of supervisory practices already conducted (frameworks for risk analysis, ICAAP assessments, Pillar 2 decisions).
  - Convergence of supervisory risk measures and corrective actions is recognized as difficult and time-consuming; promoting a harmonized supervisory culture will take time.
- Cooperation with ECB:
  - Strong cooperation needed so ECB can build procedures based on EBA best practices and align procedures with the EBA overview handbook.
  - ECB must adjust practices as Guidelines and Technical Standards are developed or updated.

### Supervisory colleges: status and EBA role
- Regulatory requirement:
  - CRD 2 (applicable from December 31, 2010) requires establishing colleges of supervisors for all cross-border banking groups to improve cross-border supervision and home-host dialogue, assist in joint decisions on capital (Pillar 2 addons), and help prepare and handle emergencies.
  - FSB has promoted supervisory colleges globally for major financial institutions.
- EBA activities and coverage:
  - EBA conducts yearly mapping to identify cross-border groups.
  - Colleges set up: 110 cross-border banks in 2011 and 87 in 2012 (EBA focuses on 40 largest colleges).
  - Some consolidating supervisors have established Core colleges for closer coordination among supervisors of most relevant entities.
  - Joint risk assessment and joint decisions must be performed and agreed by all EEA supervisors.
- EBA facilitation role and practice:
  - Article 21: EBA, in its ‘facilitator’ role, will contribute to promoting and monitoring efficient, effective and consistent functioning of colleges and foster coherence of Union law application among colleges.
  - EBA may develop draft Technical Standards regarding operational functioning of colleges.
  - EBA collects and shares relevant information in cooperation with NSAs and is establishing a central system to make such information accessible to all college members.
  - EBA may evaluate risks institutions face under supervisory review or stress situations.
  - Practical performance of the facilitator role shows considerable variety depending on group structure, type of college and EBA representative.

*Source: _cr1374 - 12. The EBA is accountable to the European Parliament and the Council. In*

### 39. At the level of the colleges, joint assessment and decisions remain

### _cr1374 - 39. At the level of the colleges, joint assessment and decisions remain

### Colleges, joint assessment, and decision quality
- Joint risk assessment and joint decisions on the adequacy of capital at group and entity level are intended to be led by the colleges under the consolidating supervisor.
- According to an EBA staff note, most colleges have developed uniform approaches, but with different levels of granularity and consistency.
- Joint decisions sometimes are only one page long, simply listing the individual capital requirements and without adequate evidence and analysis.
- EBA staff noted that individual capital requirements were not always convincingly consistent with the risk assessment, including cases where authorities imposed higher capital requirements on entities that had the best risk profile and were the most profitable of the entire group.
- Formal mediation could have been used where no joint decisions were reached; no requests for mediation were made despite some areas of disagreement.

### Cooperation with third-country supervisors
- Cooperation from third country supervisors is work in progress.
- EBA staff has been invited to participate in a few colleges set up for the EEA parts of a banking group with a parent undertaking in a third country; these appear exceptional.
- Some third country authorities have not granted full access to the EBA representative, whose role in supervision may not be clearly understood.
- Some authorities object to granular data sharing, particularly at the level of the general colleges.
- Some third country supervisors are reluctant to attend crisis management colleges.

### EBA leadership in cross-border colleges and the Single Supervisory Mechanism (SSM)
- For EU-based banking groups, the EBA should strengthen its leading role in cross-border supervisory colleges.
- The arrival of the SSM will raise new challenges: under the SSM, the design of colleges will change, the ECB will become the home supervisor, and in some cases the euro area home and host countries will participate in colleges as observers only.
- The EBA should ensure its Guidelines are observed and implemented in practice and use soft powers (“name and shame”) to foster effective and regular multilateral exchanges of information, ensure genuine joint decisions, push for mediation when no joint decision can be reached, and seek to ensure colleges reach action-oriented, forward-looking conclusions.

### EU-wide stress testing and the Risk Dashboard
- The EBA strengthened bank stress testing procedures after the poor reception of the 2010 exercise; the 2011 solvency stress testing and recapitalization exercises had more consistency checks and transparency.
- The recapitalization exercise recommended the achievement of 9 percent core Tier 1 capital by end–June 2012, after establishing a sovereign buffer against banks’ holdings of government securities based on a market-implied valuation of those holdings.
- A few banks under restructuring and recapitalization programs did not achieve the target on time.
- The EBA’s Risk Dashboard (not public) is based on Key Risk Indicators (KRI): a set of 53 ratios reported quarterly by EU national authorities, covering 57 EU banks from 20 EEA countries.
- The KRI definitions are homogeneous and consistent with supervisory and financial common EU reporting for jurisdictions that have adopted COREP and FINREP.
- Banks in the sample cover at least 50 per cent of each national banking sector; time-series are incomplete as they were collected on a best effort basis.
- While the EBA carries out consistency checks, responsibility for data quality rests with national authorities.
- The EBA provides regular risk assessments to the European Parliament, the Council, the Commission and the ESRB on trends, potential risks and vulnerabilities in the EU banking sector.

### Contribution to ESRB work
- The EBA is a member of the ESRB and participates in the General Board, Steering Committee, the Advisory Technical Committee (ATC), ATC Expert Groups, and two permanent Working Groups on Analysis Tools and on Instruments.
- The EBA collects bank-specific information for ESRB expert groups, including data on asset encumbrance, innovative funding, and interbank lending in the EU.
- The EBA provides the ESRB with bottom-up assessments of risks and vulnerabilities affecting the EU banking system and contributed to the ESRB task force on stress testing, as well as EIOPA and ESMA.
- Follow-up on ESRB Recommendations:
  - Regarding lending in foreign currencies, the EBA must by end 2013 adopt Guidelines to NSAs on capital measures relating to FX lending supervisory practices (those Guidelines have been drafted and will be approved by the EBA’s BoS in February 2013).
  - The ESRB Recommendation on dollar denominated funding includes regular data collection on funding positions which the ESRB collects from NSAs; NSAs may report in aggregate through the EBA, which already has received such a notification and wants to establish its own account in this data collection. The EBA is engaging with the ESRB Secretariat and NSAs to receive further notifications of the data collections.

### Role in fostering transparency and supervisory reporting
- The EBA is finalizing draft Implementing Technical Standards on supervisory reporting covering all EU credit institutions and investment firms, harmonizing COREP, FINREP, large exposures, liquidity and leverage ratios.
- Banks will report data to their NSAs, which will forward data on an individual basis to the EBA; the EBA will become a hub of bank-specific data.
- On COREP, FINREP and large exposures, the EBA reporting will cover 100-200 banks in the first phase; leverage and liquidity ratio reporting covers all banks.
- The EBA is drafting an RTS specifying new Basel 3 requirements on own funds disclosures, including a template for own-funds. No decision has been made yet on public dissemination of bank-specific data collected through the new reporting framework.
- The EBA published results of the EU-wide stress tests in 2010 and 2011; in 2011 a user-friendly tool provided access to more than 3000 data points for each bank disclosed.

### Quality assurance, asset quality, and Pillar 3
- Quality assurance is key; the EBA should:
  - (i) enhance the quality assurance process;
  - (ii) promote the disclosure of granular asset quality information (including collateral and risk weighted assets calculations);
  - (iii) expand depth and coverage of data audits.
- The EBA should raise supervisors’ awareness on asset quality and accurate, timely reporting, in particular by issuing Guidelines for supervisors on best practices for asset quality reviews and coordinate technical expertise with NSAs.
- The EBA should push for enhancing comparability and granularity of Pillar 3 reports; past assessments have not always been followed up with strong actions. Pillar 3 reports should be adapted to provide markets with more granular and comparable information.

### Binding powers, crisis management, and recovery and resolution
- The EBA can issue Recommendations or binding Decisions directly to NSAs in very few cases:
  - where an NSA is incorrectly applying EU law (breach of EU law, Article 17);
  - where there is a disagreement between national authorities in cross-border situations (mediation, at the initiative of the NSAs, Articles 19 and 20);
  - in emergency situations declared by the Council (Article 18).
- The EBA can take Decisions directly applicable to financial institutions as a last resort only if the NSA has not complied and only when EU law applies directly to a financial institution (Regulation and not a Directive).
- No formal case has materialized so far; the EBA has been involved in soft reconciliation measures addressing differences between home and several host supervisors and differences between home and individual supervisors.
- In 2012 actions taken on crisis management preparations:
  - The EBA issued a Crisis Management manual outlining the role of colleges in emergency situations and an EBA internal crisis management procedure guide.
  - The EBA began to attend Crisis Management Groups of a number of major cross-border banking groups.
  - In May 2012, it published a discussion paper containing a template for a Recovery Plan.
- The EBA’s coordination role will significantly expand when the Directive on Recovery and Resolution Planning is adopted; the EBA will have a strong role in coordinating and designing resolution plans for cross-border group entities and in procedures for emergency situations.

### Consumer protection and financial innovation
- Consumer protection is an EU-wide responsibility of the EBA under Article 9(1) of the EBA Regulation, including:
  - (i) collecting, analyzing and reporting on consumer trends;
  - (ii) reviewing and coordinating financial literacy and education initiatives by competent authorities;
  - (iii) developing training standards for the industry;
  - (iv) contributing to the development of common disclosure rules.
- The EBA may adopt Guidelines and Recommendations to promote safety and soundness of markets and convergence of regulatory practice, and may issue warnings if financial activity poses a serious threat to objectives in Article 1(5) of the EBA Regulation.
- The Consumer Protection Unit, set up in February 2012, had only one person and reports directly to the EBA’s Executive Director; more staff and expertise are needed, with possible support from other ESAs.
- In 2012 the EBA analyzed consumer protection in the context of the mortgage market and started preparatory work on two Guidelines:
  - Guidelines on responsible lending (using FSB Principles for Sound Residential Mortgage Underwriting Practices as a basis).
  - Guidelines on the treatment of borrowers in payment difficulties (focus on early engagement of creditors and provision of information).
- The EBA established a Standing Committee on Financial Innovation (SCFI) in May 2011 (later renamed Standing Committee on Consumer Protection and Financial Innovation, SCConFin) with all relevant national competent authorities represented.
- Workstreams examined Exchange Traded Funds (risk management and good practices), Contracts for Differences (CfDs) (nature, key risks, risk management), and Structured Products (SP) (analyzing the European SP market).
- The need for regulatory work on financial innovation should be assessed based on impact on financial stability and consumers, avoiding duplication with securities arena work (for instance on ETF by ESMA or FSB).

### Cross-sector work and the Joint Committee of ESAs
- The Joint Committee of ESAs, established on January 1, 2011 (Article 54 to 57 of the ESAs), is a forum for cross-sector cooperation among the three ESAs and succeeded the former Joint Committee on Financial Conglomerates.
- Mandated areas include: (i) supervision of financial conglomerates (Guidelines for colleges of Financial Conglomerates will be drafted by end 2014), (ii) accounting and auditing consistency, (iii) micro-prudential analyses of cross-sectoral developments, (iv) risks and vulnerabilities for financial stability, (v) retail investment products, (vi) anti–money laundering measures, and (vii) information exchange with the ESRB and development of the relationship between the ESRB and the ESAs.
- Chairmanship rotates between the three ESAs; the Chairperson of the Joint Committee is the second Vice-Chair of the ESRB. Membership includes Chairpersons of EBA, EIOPA and ESMA and Chairpersons of the four Sub-Committees; observers include Executive Directors of EBA, EIOPA and ESMA, a representative of the European Commission, and a representative of the ESRB.
- The Joint Committee had dedicated staff provided by the ESAs: for EBA, one FTE in 2011 and two FTE in 2012.
- The Joint Committee meets at least every two months at the premises of the ESA chairing and may convene extraordinary meetings when necessary.
- The Joint Committee conducts cross-sector risk assessments, produces policy-focused risk reports for the “Financial Stability Table” discussions at the Economic and Financial Committee of the Council of the EU meetings in March and September each year, and assists in developing cooperation between ESAs and the ESRB.

### Summary of recommendations (selected)
A. Governance
- Representatives of some other EU institutions (except the Commission), and possibly the respective EBA Chairperson, could have a vote on the Supervisory Board.
- The powers of the Management Board could be further strengthened with more delegated powers from the Board of Supervisors, or a permanent Executive Board, composed of independent representatives, be formed.
- Members who do not comply with Article 40 of EBA Regulation should see their votes suspended. A mechanism of written procedure could be introduced.
- More resources need to be allocated to the EBA, and more flexibility in the budget should be considered.

B. Regulatory and Supervisory Actions
- Raise awareness of supervisors on asset quality issues by issuing Guidelines for supervisors on best practices for asset quality reviews and urgently push for enhancing comparability and completeness of Pillar 3 reports.
- Accelerate convergence on Pillar 2 practices (common methodologies for risk assessment), including harmonizing work on consistency of treatment of RWAs with BCBS Level 3 exercises and following up with Guidelines or draft Technical Standards.
- Foster cooperation by encouraging joint onsite supervision by member countries and resume thematic peer reviews.
- Implement peer reviews on the adequacy of supervisory resources and governance arrangements of supervisory authorities.
- The EBA should play a more leading role in cross-border supervisory colleges and be able to participate in core colleges of EU banking groups having activities abroad; EBA engagement should go beyond the EU and encompass larger international groups active in Europe.
- The EBA should ensure its Guidelines are observed and implemented, using soft powers (“name and shame”) to foster effective multilateral exchanges of information, ensure genuine joint decisions and push for mediation when no joint decision can be reached.
- The EBA should work closely with the ECB so that the SSM can build procedures based on EBA Guidelines and the EBA’s Supervisory Handbook.

C. Oversight
- Strengthen transparency and the reliability of data by:
  - (i) enhancing the quality assurance process;
  - (ii) promoting disclosure of granular asset quality information;
  - (iii) expanding depth and coverage of the 2012 audits.
- Ensure Pillar 3 reports are enhanced and harmonized.

D. Consumer Protection and Cross-sector
- In consumer protection, the EBA should be organized to fulfill its mandate; more staff and building of knowledge are needed.
- Financial innovation work should focus on consumer protection and avoid overlap with work in the securities arena (for instance on ETF by ESMA or FSB).

*IMF staff report content unit: _cr1374 - 39. At the level of the colleges, joint assessment and decisions remain*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2013/_cr1374.pdf_