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© Oliver Wyman FINANCIAL SERVICES TOWARDS THE EUROPEAN BANKING UNION: KEY CHALLENGES AND IMPLICATIONS December 2014 Angelo Federico Arcelli Partner, Oliver.

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Presentation on theme: "© Oliver Wyman FINANCIAL SERVICES TOWARDS THE EUROPEAN BANKING UNION: KEY CHALLENGES AND IMPLICATIONS December 2014 Angelo Federico Arcelli Partner, Oliver."— Presentation transcript:

1 © Oliver Wyman FINANCIAL SERVICES TOWARDS THE EUROPEAN BANKING UNION: KEY CHALLENGES AND IMPLICATIONS December 2014 Angelo Federico Arcelli Partner, Oliver Wyman

2 CONFIDENTIALITY Our clients’ industries are extremely competitive. The confidentiality of companies’ plans and data is obviously critical. Oliver Wyman will protect the confidentiality of all such client information. Similarly, management consulting is a competitive business. We view our approaches and insights as proprietary and therefore look to our clients to protect ’s interests in our proposals, presentations, methodologies and analytical techniques. Under no circumstances should this material be shared with any third party without the written consent of Oliver Wyman. Copyright © Oliver Wyman

3 2 © Oliver Wyman 2 Following the CA, prudential supervision responsibilities will be transferred to the ECB and resolution responsibilities to the SRB Entry in force of Single Resolution Mechanism Entry in force of Single Supervisory Mechanism Comprehensive Assessment results and follow-up Q H 20152H Oct Results publication 9 Nov Banks to present capital plans to ECB August months timeline to cover capital shortfall from adverse scenario May months timeline to cover capital shortfall from AQR or baseline scenario 1 st January 2015 Entry in force of the Single resolution mechanism: Single Resolution Board becomes responsible for SSM Banks resolution planning and managing the resolution of institutions in serious difficulties 1 st January 2016 Entry in force of Single Resolution Fund that will pool resolution funds of single countries and provide funding to enable the bank to continue operating while it is being restructured 4 November ECB assumes its new prudential supervision responsibilities

4 3 © Oliver Wyman 3 The ECB supervises more assets and more global systemically important institutions than any other regulator Bank Assets under supervision, € TN # of G-SIFI Direct supervision of: –120 Banking Groups 2 –Located in 19 countries –Corresponding to 1,258 Legal Entities – some of which located outside of the Eurozone Through the indirect supervision mechanism, the ECB supervises additional 3,500 institutions Details on institutions supervised by ECB Eurozone (ECB) China (CBRC) US (FED, FDIC,...) UK (PRA) Japan (FSA) Direct supervisionIndirect supervision Source: ECB; EBA credit register; 1. Global systemically important financial institutions as per FSB definition; 2. ECB direct supervision perimeter does not match exactly with the preliminary institutions selection subject to Comprehensive assessment

5 4 © Oliver Wyman 4 We expect three forms of response to the Comprehensive Assessment from the Financial Services industry Strategic and tactical reshaping Capital raising as a result of both the CA and other concurrent regulatory developments (eligibility of capital instruments for fully loaded Basel III capital ratios) Consolidation and divestments, especially in the most affected countries Recognition of the results of CA in underwriting standards, provisioning, pricing (assets and liabilities) and capital allocation Capabilities upgrade Scenario planning and enhanced stress testing capabilities RWA calculation upgrades NPL management Upgrade to data infrastructure and management Regulatory interface SSM – banks will need to respond to the different (and in many cases more onerous) demands of the joint supervisory team National regulators – creation of two-layered regulatory system likely to increase regulatory focus on topics such as conduct risk

6 QUALIFICATIONS, ASSUMPTIONS AND LIMITING CONDITIONS This report is for the exclusive use of the client named herein. This report is not intended for general circulation or publication, nor is it to be reproduced, quoted or distributed for any purpose without the prior written permission of. There are no third party beneficiaries with respect to this report, and does not accept any liability to any third party. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. accepts no responsibility for actual results or future events. The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof. All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness of any transaction to any and all parties.


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