European monetary system and european currency

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As regards the capital markets, the effects of the euro will take more time to manifest themselves, but are likely to be substantial. The single currency offers substantial opportunities for both debt and equity issuers and investors. The increase in the number of market participants operating in the same currency increases the liquidity of the capital markets and reduces the cost of capital. The low level of inflation and nominal interest rates and diminishing public sector deficits are additional supporting factors of capital market activity, especially private bond market activity which has so far been relatively limited (Table 5). Banks will thus operate in increasingly integrated capital markets and will be exposed to shocks originating beyond their national borders.

As to corporations, they may concentrate their operations (treasury, capital market and payment management) in a single or few "euro banks", while the disappearance of national currencies may break links between firms and their home country "house bank". This dissociation would make the domestic economy indirectly sensitive to foreign banks' soundness, thus creating another propagation channel of banking problems across countries.

12. When considering the industry scenario for the coming years, the viewpoint has to be broadened beyond the impact of the euro. Rather than the exclusive, or even primary, force for change, the euro is expected to be a catalyst for pre-existing trends driven by other forces. The recent ECB report prepared by the Banking Supervision Committee on "Possible effects of EMU on the EU banking systems in the medium to long term" gives a comprehensive analysis of such trends, which can be summarised as follows. First, regulation: the industry has yet to feel the full impact of such fundamental, but relatively recent, regulatory changes as those related to the single market legislation. Second, disintermediation: other financial intermediaries and institutional investors will grow relative to banks, pushed by demographic and social changes, as well as by the increasing depth and liquidity of the emerging euro area-wide capital market. Disintermediation is expected to take the form of increasing recourse to capital market instruments relative to bank loans by firms, and diminishing investment in deposits by households relative to mutual funds and related products. Third, information technology: bank products, operations and processes are changing rapidly, while technology offers increasing possibilities for dissociating the supply of a large number of services from branches and face-to-face contact with customers. The current tendency in the EU banking systems to reduce over-branching and over-staffing will grow stronger.

These factors will increase competition, exert pressure on profitability and oblige banks to reconsider their strategies. Such effects are already visible throughout the EU. They produce changes in organisation, new products and services, mergers, strategic alliances, co-operation agreements, etc. They also involve strategic risks, because the pressure for profitability and some losses of revenue due to the euro, for example from foreign exchange, may push some banks to seek more revenue from unfamiliar business or highly risky geographical areas. Inadequate implementation of new technologies or failure to reduce excess capacity may also affect banks' long-term viability. In the short term, the structural adaptation process could be made more difficult by the combination of factors like the protracted financial difficulties of Asia and Russia, or the preparations for the year 2000.


13. Against the background of the institutional framework and the industry scenario I have outlined, let me now turn to the functioning of banking supervision in the euro area. Two preliminary observations. First, the objective of financial stability pursued by banking supervisors is only one in a range of public interests, which also includes competition policy and depositor and investor protection policy. Second, current supervision and crisis management involve different situations and procedures and will therefore be examined in sequence.

14. Starting with current supervision, let me consider banking regulation first. As observed earlier, the regulatory platform for the euro area banking industry combines harmonised rules with country-specific (non-harmonised, but mutually recognised and hence potentially competing) rules.

The harmonised part of the platform includes most of the key prudential provisions that have been developed in national systems over the years. More than 20 years ago (1977), the 1st Banking Co-ordination Directive adopted a definition of a credit institution and prescribed objective criteria for the granting of a banking licence. In 1983 the first Directive on carrying out supervision on a consolidated basis was approved, and in 1986 the rules relating to the preparation of the annual accounts and the consolidated accounts of banks were harmonised. In 1989 the 2nd Banking Co-ordination Directive (which became effective on 1 January 1993) marked the transition from piecemeal to comprehensive legislation, introducing, inter alia, the principle of "home country control". A number of other specific directives have subsequently addressed the main aspects of the regulatory framework - notably, own funds, solvency ratios and large exposures. A Directive imposing deposit guarantee schemes supplemented the legislation in support of financial stability. All in all, the European Union, including the euro area, now has a rather comprehensive "banking law" consistent with the Basle Committee's rules and with the 1997 Core Principles of Banking Supervision.

Реферат опубликован: 12/08/2008