McCreevy speaks on cross-border supervision

The internal market commissioner has delivered a speech on cross-border banking and insurance supervision

NICE – Charlie McCreevy has delivered a dual-pronged speech aimed at addressing issues of cross-border supervision for the European banking and insurance sectors. The European commissioner for the internal market was addressing the 2008 Eurofi conference in Nice, France.

McCreevy spoke of the 2006 Capital Requirements Directive (CRD) and upcoming Solvency II legislation as the legislative context for future supervision of the European Union’s multinational banks and insurers.

For banks, McCreevy flagged the role of the Committee of European Banking Supervisors in addressing home-host issues and preventing divergence across member states, and the decision to amend the CRD to take into account supervisory colleges. He said there was a consensus for the colleges’ use.

“But clear objectives for colleges should be set,” said McCreevy. “There should be consistent application of requirements within banking groups. There should be no duplication of requirements and information requests. Colleges should also be effective in dealing with group-wide issues. And we have decided to reinforce the powers of the consolidating supervisor for two supervisory aspects, namely capital add-ons for subsidiaries (Pillar II) and prudential reporting requirements.”

Commenting on the scenario of a cross-border group running into trouble, McCreevy asked whether cooperation arrangements between ministries of finance, central banks and supervisors were fit for purpose. “All member states operate some form of early intervention mechanism to handle a crisis in an ailing bank,” he said. “But the nature of the measures differs across member states. While speedy action might be critically important to the survival of the institution or to minimise costs, such differences have the potential to complicate or impair efficient cross-border crisis handling. The Commission is committed to addressing these issues in next year's white paper on early intervention.”

On the looming Solvency II legislation, McCreevy stated developments in the EU Parliament and Council were continuing “at an impressive pace”.

“The prize is a big one,” said McCreevy. “If we succeed, and we will, we will have established what I hope will be the best up-to-date risk-based insurance supervisory system in the world – which I believe will be a model for other countries. The EU will be ahead.”

The internal market commissioner went on to highlight the need for simplicity and modernisation in the new Solvency directive. He also acknowledged ongoing debates in the European Council’s working group and the opposition of several members – usually understood to be central and eastern European states – to the European Commission’s approach to the group support regime.

“There are clear benefits – both for undertakings and supervisors – attached to a more integrated supervision of insurance groups, which is another key objective of our proposal. We must make group support work. It is an essential element of the proposal which I am particularly attached to. I have made it clear that I will not support amendments that undermine the basis of the group support regime,” said McCreevy.

The commissioner underlined a vision of an enhanced future role for Europe-wide supervision and the key role supervisory colleges will play for the insurance industry, under the mantle of the Committee of European Insurance and Occupational Pensions Supervisors.

“We envisage the introduction of a European dimension in the national mandate of supervisory authorities, with a view to ensuring they will have due regard to the interests of policyholders in other member states when carrying out their rights and duties under the new regime,” he said.