Sacha POLVERINI European Public Policy Director

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THE EU RESPONSE TO THE CRISIS
Sacha POLVERINI European Public Policy Director
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A crisis born from a decade of global economic
growth

• Macro-imbalances
• Weaknesses and extremes in the securitization
  market
• High leverage in multiple forms
• Excessive confidence in the market
• Excessive reliance on external credit ratings
• Liquidity and market risk underestimation
• Insufficient capital
• Gaps and flaws in the regulatory framework
• Pro-ciclycality
• Gaps and flaws in the supervisory framework
• Executive remuneration policy
• Role of the parallel banking sector

The status quo is not an option
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A comprehensive reform...
Re-securitisation
Macro-Prudential Supervision
Micro-Prudential Supervision
Core Tier1
Tier 1
Trading book
Private Equity
Accounting
Prociclycality
Leverage ratio
Liquidity risk
Hedge Funds
Home/Host
Credit Rating Agencies
Directors remuneration
Crisis intervention measures
Deposit Insurance
Responsible lending
. with long lasting effects
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Concluding remarks
Implications, risks and opportunities of the
proposed reform
Risk factors
Issues
Benefits

• Pace and scope of the reform
• Political interference
• International inconsistencies
• Regulation vs innovation
• Reduced product availability
• Intrusive supervision
• Aggregate impact of the reform
• Capital Market Funding
• Supervisor competence
• Regulatory contagion

Role of the banking sector in the economy
Future of universal banks Change in product
offering Banks risk taking capacity Economic
recovery Supervision of internationally active
groups
Financial stability Legal certainty Level playing
field