EBA notes progress in convergence of supervisory practices across the EU

The European Banking Authority (EBA) published today its second annual Report on the convergence of supervisory practices across the EU. The Report, which is addressed to the EU Parliament and the Council, reviews consistency in the application of the Supervisory Review and Evaluation Process (SREP) and supervisory practices in the assessment of recovery plans. The EBA's work in supervisory convergence is designed to foster comparable approaches and consistent outcomes in applying the Single Rulebook. This is necessary for a level playing field, effective supervision of cross border groups, and to identify supervisory best practices. 

 

The Report highlights that supervisory authorities across the EU have made additional progress on convergence of supervisory practices, also thanks to the implementation of the EBA SREP Guidelines for the 2016 SREP cycle. In particular, the EBA notes the consistent structure of various SREPs and clear articulation of additional capital requirements, mirroring the composition of minimum own funds requirements.

 

However, the report also identifies important differences, in particular in determining the amount of additional capital requirements and in the legal nature of such requirements. These, in combination with the application of automatic restrictions on distributions, risk different treatment of banks and investors in the Single Market.

 

Common rules are vital for the effective functioning of the Single Market and consistency in supervisory risk assessments and outcomes play an important role in supporting the Single Rulebook, whilst maintaining the space for proportionality and supervisory judgement that is required for effective supervision.
 

 

One of the EBA's key mandates is to develop ensure supervisory convergence and consistency of supervisory outcomes within the EU. In addition, Article 107 of Directive 2013/36/EU (CRDIV) includes a specific mandate for the EBA on consistency of supervisory reviews, evaluations and supervisory measures in Member States. This Article also requires the EBA to report to the EU Parliament and the Council on the degree of convergence of supervisory practices.

 

Based on this mandate, the EBA has collected information and analysed relevant supervisory practices. It has also developed a number of Guidelines and Technical Standards and contributed to the promotion of convergence in supervision through its participation in Colleges of Supervisors of cross-border institutions, the development of a European Supervisory Handbook, the provision of dedicated training, and the performance of analytical and benchmarking activities.