UniCredit Group Regulatory Affairs. Aurelio Maccario Head of Group Regulatory Affairs

Transcription

1 UniCredit Group Regulatory Affairs Aurelio Maccario Head of Group Regulatory Affairs 11 May 2016

2 The reaction Banking Industry 2008 Crisis Why Regulatory Affairs is becoming a crucial function in cross border banking institutions? The international financial crisis begun in 2008 is widely considered the worst crisis since the Great Depression of the 1930s The consequences for the global economy have been extremely harsh in terms of GDP growth, unemployment rate, impact on taxpayers The entire Banking System has been blamed of being responsible for the crisis due to: Too easy credit conditions and almost-absent risk aversion Weak underwriting practices Financial innovation and complexity Regulatory framework not able to properly measure risks The policy response by Lawmakers and Regulators was strong and aimed at removing banking system vulnerabilities highlighted during the crisis CAPITAL QUANTITY AND QUALITY TOO BIG TO FAIL ISSUE BANKING UNION 2

3 Consequences The wave Regulatory is probably the current most detrimental factor on banks profitability and is deeply reshaping the business model IFRS expected: TLAC, Basel 4 package European banks: CET1 Capital Shortfall to JPMe minimum 2018E pre-mitigation action Banks with return on equity lower than cost of equity (source: IMF) % costs / total assets ITA banking system (source: BankIT) o/w HR 1,54 1,40 1,35 1,43 1,33 1,32 1,39 0,81 0,72 0,71 0,75 0,70 0,67 0,

4 BANKING UNION Core Mission Regulation and a new way of doing banking SINGLE SUPERVISORY MECHANISM (SSM) Focus Areas SINGLE RULE BOOK SREP CAPITAL BUFFERS ECB as Single Supervisor IMPACT ASSESSMENT New regulatory initiatives must be carefully assessed for early identification of impact in terms of: Organizational structure Capital, Liquidity and Profitability IT and Operations SINGLE RESOLUTION MECHANISM (SRM) Bank Recovery and Resolution Directive Deposit Guarantee Scheme MREL & TLAC SRB - single Resolution Authority Regulatory map including prioritization drivers Identify regulatory driven threats on business model and profitability Steer Advocacy initiatives 4

5 Within UCG the role of the Group Regulatory Affairs has been reshaped in order to face the new supervisory framework in an efficient way Outside UCG Inside UCG Single Point of entry towards ECB at Group level Group pivot function for all supervisory processes (SREP, model authorization, thematic reviews, onsite and off-site inspections, ) Enforce the dialogue with ECB / JST, managing the relation in a proactive way Represent UCG position in a coordinated and credible fashion Group Regulatory Affairs Build up of unified views at UCG level, representing all the involved parties and legal entities Promote Top Management awareness Integrated approach with both rule setters and Supervisors Spread the SREP culture within the group (reporting, teach-in, ) 5

6 Our core activities Put the money where your mouth is Our approach is designed to allow for a throughout management of regulatory issues, via dedicated analytics Within the GIRA department a new unit has been set up to manage all topics related to the analysis of impacts from upcoming regulations (regarding capital, liquidity, profitability etc.), the steering and assessment of the SREP and the management of issues related to the BRRD, including Group Recovery & Resolution Plan RRP central unit & BRRD 1 UCG Recovery and Resolution Plan (RRP) Central Unit Coordinate local contribution to Group RRP Coordination of Impact Assessment for regulatory changes linked to BRRD Manage relations with ECB and Single Resolution Board on RRP Regulatory & Supervisory Impact Assessment 2 SREP management and assessment SREP coordination and management Engage Supervisors on SREP contents Impact assessment in relation to supervisory topics Monitoring of implementation of corrective measures in response to supervisory findings 3 Regulatory Impact Analysis Regulatory Multi Year Plan & support to the advocacy activity Contribute to UCG Regulatory Agenda definition Coordination of impact assessment of new regulations Conduct Risk framework 6

7 Single Supervisory Mechanism is a key pillar of the European Banking Union Single Supervision (SSM) The European Central Bank is the central prudential supervisor (directly supervises the largest banks, while the national supervisors continue to monitor the remaining banks) European Banking Union Single Resolution (SRM) Orderly resolution of failing banks with minimal costs for taxpayers and to the real economy through Single Resolution Board and a Single Resolution Fund European Deposit Insurance Scheme The purpose of EDIS is to ensure equal protection of deposits through the Banking Union regardless of the Member State where the deposit is located. Single Supervisory Mechanism (SSM) Single Rule Book Set of legislative texts that all financial institutions in the EU must comply with (lay down capital requirements for banks, ensure better protection for depositors, regulate the prevention and management of bank failures, ) 7

8 The day-to-day supervision of Significant Institutions is conducted by Joint Supervisory Teams (JST) In the case of JSTs comprising a large number of staff, core JST organises the allocation of tasks among JST members, prepares and revises the Supervisory Examination Programme (SEP) and monitors its implementation, reviews the consolidated risk, capital and liquidity assessment JST COORDINATOR Coming from ECB Responsible for the implementation of supervisory tasks and activities Different nationality than the supervised CI HORIZONTAL DIVISIONS: support JSTs and NCAs in the conduct of supervision of both SIs and LSIs Support the JSTs in implementing common standards, methodological issues with the aim to ensure consistency across the JSTs supervisory approaches CORE JST SUBCOORDINATORS Responsible for thematic or geographic areas of supervision Support JST Coordinator in the day-to-day supervision Receive additional support from horizontal and specialised expertise divisions 8 The JSTs comprise staff from both the ECB and the NCAs A JST is established for each significant institution The size of a JST can vary depending on the nature, complexity, scale, business model and risk profile of the bank

9 Banks and particularly G-SIBs have redesigned their approach to Regulatory Management Increasing demands facing Regulatory Management Old School Key Drivers New Paradigm Re-active Confrontational Ad-hoc Decentralized-local Focused on lobbying Siloed Fragmented reporting One-off, "thick-the-box" exercises Increased aggressiveness of regulators Public backlash against banks Increased incidents Complexity and severity of business impact of regulation Pro-active Collaborative Strategic Centralized-regional Business-driven Cross-functional / Crossdivisional Reporting to CEO / Board Business practice embedded solutions Dedicated resources are required to manage regulatory activities 9

10 Group Regulatory Affairs put huge effort to set up a smooth, fruitful and accountable interaction with the Supervisor Planning of supervisory activity Communication between supervisor and the bank Day-to-day supervision Based on Supervisory yearly program and priority areas, Group Regulatory Affairs supports the definition of internal plans and projects to properly address these topics For 2016 Supervisory Priorities have been published and discussed directly with the bank Top Management Various channels for coordinating a multitude of topics (e.g. workshops, ad-hoc meetings, calls) A continuous dialogue between JST and bank representatives is key for ensuring the mutual understanding during the supervisory process Some number based on UCG experience in 2015 Ca. 270 meetings/ workshops/ calls with an average UCG attendance of 7 top managers / colleagues 22 on-site inspections and model validations UCG Holding Company as Single Point of Entry towards ECB ECB applies different supervisory tools (e.g. on-site, thematic review, workshop, off-site) for the yearly Supervisory Review and Evaluation Process (SREP) English as operative language for communicating with ECB The transition from the former supervisory practices to the new supervisory culture requires a lot of coordination, timely and effective communication as well as mutual understanding between all parties 10