Official Journal of the European Union
mutuals, cooperative societies and similar institutions and which are deemed equivalent to ordinary shares in terms of their capital qualities in particular as regards loss absorp tion. Instruments that do not rank pari passu with ordinary shares during liquidation or which do not absorb losses on a going-concern basis pari passu with ordinary shares should be included in the category of hybrids referred to in Article 57(ca) of Directive 2006/48/EC.
In order to avoid disruption of markets and to ensure con tinuity in overall levels of own funds it is appropriate to provide for specific transitional arrangements for the new regime on capital instruments. Once recovery is assured, the quality of original own funds should be further enhanced. In this regard, the Commission should report to the European Parliament and the Council together with any appropriate proposals by 31 December 2011.
For the purpose of strengthening the crisis management framework of the Community, it is essential that compe tent authorities coordinate their actions with other com petent authorities and, where appropriate, with central banks in an efficient way, including with the aim of miti gating systemic risk. In order to strengthen the efficiency of the prudential supervision of a banking group on a con solidated basis, supervisory activities should be coordi nated in a more effective manner. Colleges of Supervisors should therefore be established. The establishment of Col leges of Supervisors should not affect the rights and responsibilities of the competent authorities under Direc tive 2006/48/EC. Their establishment should be an instru ment for stronger cooperation by means of which competent authorities reach agreement on key supervisory tasks. The Colleges of Supervisors should facilitate the han dling of ongoing supervision and emergency situations. The consolidating supervisor should, in association with the other members of the college, be able to decide to orga nise meetings or activities that are not of general interest and should therefore be able to streamline the attendance
differences in the approaches and rules applied by the vari ous colleges and the application of discretion by Member States, guidelines on the procedures and rules governing colleges should be developed by the Committee of Euro pean Banking Supervisors.
Article 129(3) of Directive 2006/48/EC should not change the allocation of responsibilities between competent super visory authorities on a consolidated, sub-consolidated and individual basis.
Information deficits between the home and the host com petent authorities may prove detrimental to the financial stability in host Member States. The information rights of host supervisors, in particular in a crisis involving signifi cant branches, should therefore be reinforced. For that pur pose, the notion of significant branches should be defined. The competent authorities should transmit information which is essential for the pursuance of the tasks of central banks and of Ministries of Finance with respect to finan cial crises and systemic risk mitigation.
The current supervisory arrangements should be subject to further developments. Colleges of Supervisors are a further and important step forward in streamlining European Union’s supervisory cooperation and convergence.
Cooperation between supervisory authorities, dealing with groups and holdings and their subsidiaries and branches, by means of colleges is a phase in a development towards further regulatory convergence and supervisory integra tion. Trust between supervisors and respect for their respective responsibilities is essential. In the event of a con flict between members of a college linked to those differ ent responsibilities, neutral and independent advice, mediation and conflict-resolving mechanisms at Commu nity level are essential.
The mandates of competent authorities should take into account, in an appropriate way, the Community dimen sion. Competent authorities should therefore duly consider the effect of their decisions on the stability of the financial system in all other Member States concerned. Subject to national law, that principle should be understood as a broad objective for promoting financial stability across the European Union and should not legally bind competent authorities to achieve a specific result.
The competent authorities should be able to participate in colleges established for the supervision of credit institu tions having their parent in a third country. The Commit tee of European Banking Supervisors should, where necessary, provide for guidelines and recommendations in order to enhance the convergence of supervisory practices pursuant to Directive 2006/48/EC. In order to avoid incon sistencies and regulatory arbitrage, which could result from
The crisis in international financial markets has demon strated that it is appropriate to examine further the need for reform of the regulatory and supervisory model of the European Union’s financial sector.
The Commission announced in its Communication of 29 October 2008 entitled ‘From financial crisis to recov ery: A European framework for action’, that it had set up a group of experts, chaired by Mr Jacques de Larosière (the de Larosière Group), to consider the organisation of Euro pean financial institutions to ensure prudential soundness, the orderly functioning of markets and stronger European cooperation on financial stability oversight, early warning mechanisms and crisis management, including the man agement of cross-border and cross-sectoral risks, and also to look at cooperation between the European Union and other major jurisdictions to help safeguard financial stabil ity at the global level.