Conference on financial integration and stability in europe madrid 30 november 1 december 2006
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Conference on Financial Integration and Stability in Europe Madrid, 30 November-1 December 2006. Remarks by Henk Brouwer Executive Director, De Nederlandsche Bank. 1 Update conclusions EFC Reports Report on Financial Stability (2000) - Recommendations :.

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Conference on Financial Integration and Stability in Europe Madrid, 30 November-1 December 2006

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Conference onFinancial Integration and Stability in EuropeMadrid, 30 November-1 December 2006

Remarks by

Henk Brouwer

Executive Director, De Nederlandsche Bank


1 Update conclusions EFC ReportsReport on Financial Stability (2000) - Recommendations:

  • Strengthen cross-sector co-operation at international level

  • Exchange of information among supervisors and between supervisors and central banks

  • Strengthen co-operation between supervisors and central banks

  • Convergence of supervisory practices


1 Update conclusions EFC ReportsReport on Financial Crisis Management (2001) - Recommendations:

  • Supervisors ensure that management information systems of financial institutions is adequate

  • In a crisis, timely exchange of information  remove legal impediments and develop checklists

  • Agreement on co-ordinating supervisor

  • Develop MoUs to deal with crisis management issues

  • Timely and robust procedures competition authorities


1 Update conclusions EFC ReportsInstitutional developments since 2001:

  • Lamfalussy approach in securities markets + banking and insurance regulation

  • Supervisory convergence promoted by Level 3 committees

  • Multilateral MoUs on crisis management (2003, 2005)

  • Crisis simulations to test cooperation

  • Agreement on co-ordinating supervisor


2 Are current regulatory arrangements in line with developments in financial markets?Market developments:

  • Growth in size and complexity of financial institutions→ LCFI´s

  • Internationalisation and centralisation of internal functions→ cross-border issues

  • Blurring of distinctions between financial sectors  financial conglomerates, cross-sector issues

  • Rise of non-regulated institutions


2 Are current regulatory arrangements in line with developments in financial markets?Regulatory arrangements:

  • Institutional framework EU remains sectorally oriented + country based

  • Home country control was instrumental in furthering integration, but …

  • ...its limitations are becoming apparent:

  • role of subsidiaries and their supervisors

  • financial stability implications in case of foreign ownership

  • crisis management


3 Is the European institutional set-up adequate for preventing and handling financial crisis ?

  • Crisis prevention: supervisory framework works, although not perfectly:

  • conceptual issues (home control, cross-sector)

  • inefficiencies (hence: striving for convergence, but financial industry complaints and demands)

  • institutional framework and supervision necessary, but not sufficient conditions for financial stability

    ●Crisis management:

    EU framework not seriously tested yet


Agenda

  • Convergence

  • Coordination mechanisms

  • Involve central banks

  • Expand on home country control …

  • ... but involve host countries

  • Burden sharing


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