A comparative analysis of the US and EU retail banking markets - Wsbi

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The SROs have the responsibility to develop rules which guarantee the integrity of the markets they are responsible for and the protection of investors. These rules must be submitted to the SEC, which has to agree on them, after having performed a public consultation. However, the SEC also has the possibility to draft rules which are directly applicable to the entirety of the market. It should be noted here that in the American regulatory system, a distinction is made in terms of responsible authorities between securities and futures; in the futures area, like in the securities one, supervision and regulation are organised at the federal level. In this field however, federal oversight is ensured by the Commodity Futures Trading Commission (CFTC) (and not by the SEC), whereas industry oversight is the responsibility of the SROs – the futures exchanges and the National Futures Association (NFA). 4.2.2.1.3 Responsible authorities in the insurance area The regulation and supervision of the insurance area is the exclusive responsibility of regulators at the states level, unlike in the other financial services sectors. The view that regulation should take place at the states level was defended by the McCarren-Ferguson Act of 1945. A central structure was however established to help coordinate the approaches of the 50 state regulators: the National Association of Insurance Commissioners (NAIC). Historically, state regulators in the insurance area have stressed specifically the safety and soundness issues, as well as the conduct-of-business area, especially in relation to sales practices. 4.2.2.2 European Union 4.2.2.2.1 EU bodies In the European Union, the responsibility for supervising the financial services area lies entirely at the Member States level. There are therefore no EU bodies in the financial area comparable to the US regulatory agencies. Some “Committees” however play a coordinating role, and will therefore be presented in the subsequent section “Coordination in the EU”. 4.2.2.2.2 Member State level Member States are responsible for organising the supervision of their financial services sector in the way they consider the most appropriate. Consequently, there is much variety among the supervisory structures of the 25 individual Member States. Historically, in most EU Member States supervision was organised for each different area of the financial services sector individually: banking, securities and insurance. However, this situation changed in recent years in several Member States, with a clear trend towards the establishment of a single authority to supervise the three traditional sectors. This move was often presented as a response to important changes in the financial sector, such as the increasing blurring of the specificities of the different types of financial services businesses and the trend towards more consolidation and conglomeration in the financial sector, especially at the level of the Member States. The first country to establish an independent single supervisory authority was the UK in 1997 with the establishment of the Financial Services Authority (FSA). The FSA is responsible for the prudential supervision and more general business supervision of all financial institutions and markets. Other countries have also re-examined their supervisory arrangements. A single authority was for instance created in Luxembourg 145 in 1998. A proposal for a single authority in Germany 146 was put forward in January 2001 and entered into force in April 2002. In Austria too, a single authority 147 was formally established in April 2002. In each of these cases, the single authority is independent from any other institution. National central banks also play a role in supervision. Traditionally, their direct role in the supervisory process was limited to the banking sector. In certain Member States however, a decline in this role has been observed in recent years as a direct consequence of the combining of financial supervisory competences in just one agency. There are nevertheless exceptions, such as Ireland, where a single authority has been created under the wing of the national central bank, and the Netherlands, which is the first EU Member State in which the central bank will take over the supervision of all three financial sectors, thus breaking with a long supervisory tradition, where the role of the central bank is generally limited to maintaining financial stability. 145 Commission de surveillance du Secteur Financier. 146 Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). 147 Finanzmarktaufsichtsbehörde (FMA). 52
Despite the trend towards the establishment of a single supervisor at the national level, it should be mentioned that some Member States have decided to maintain the traditional division between sectors, such as for example France, Spain and Italy 148 . The following table provides a summary of the state of play in the 25 EU Member States plus the two countries of the European Economic Area (Norway and Liechtenstein) 149 . COUNTRY BANKING SECURITIES INSURANCE Austria FSA FSA FSA Belgium FSA FSA FSA Cyprus CB SI SI Czech Rep. CB S G Denmark FSA FSA FSA Estonia FSA FSA FSA Finland BS BS I France B / CB S I Germany FSA FSA FSA Greece CB S G Hungary FSA FSA FSA Italy CB S I Ireland FSA FSA FSA Latvia FSA FSA FSA Lithuania CB S I Liechtenstein 150 FSA FSA FSA Luxembourg BS BS I Malta FSA FSA FSA Netherlands CB / FSA CB / FSA CB / FSA Norway 151 FSA FSA FSA Poland CB S I Portugal CB S I Sweden FSA FSA FSA UK FSA FSA FSA Slovak Rep. CB SI SI Slovenia CB S I Spain CB S I Note: B = specialised banking supervisor BS = banking and securities supervisor CB = Central Bank FSA = single financial supervisory authority G = government department I = specialised insurance supervisor S = specialised securities supervisor SI = specialised securities and insurance supervisor 4.2.2.2.3 Coordination in the EU Although supervision in the European Union is an area left to the Member States, some EU bodies do play a coordinating role of the actions of all the national supervisory authorities. This is in fact one of the main tasks assigned to the “level 3” Committees (CESR, CEBS and CEIOPS), created in the context of the establishment of the Lamfalussy process. Their main role is to improve the coordination among national regulators / supervisors and to ensure more consistent and timely day-to-day implementation of community legislation in the Member States. CESR (Committee of European Securities Regulators), established in 2001 152 , is the oldest of the “Level 3” Committees. Originally created to be active in the securities area, its functions were extended in 2003 to the area of asset management 153 . The members of CESR are the heads of the national public authorities competent in the field of securities, with one member on the committee for each EU Member State. Norway and Iceland, as members of the European Economic Area (EEA) are also represented at a senior level. CEBS (Committee of European Banking Supervisors) and CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors) were established officially in 2003 154 , to cover the areas of banking and insurance respectively. CEBS is comprised of high level representatives from the banking supervisory authorities and central banks of the European Union. CEIOPS is composed of high level representatives from the insurance and occupational pension supervisory authorities from Member States of the European Union. As with CESR, the authorities of the Member States of the European Economic Area also participate in CEBS and in CEIOPS. 148 France is an interesting case, as not less than five different authorities share the responsibility of the control of the financial sector: Commission de contrôle des assurances, des mutuelles et des institutions de prévoyance; Commission bancaire; Comité des enterprises d’assurance; Comité des établissement de credit et des entreprises d’investissement; Autorité des marchés financiers. 149 The information contained in the table builds on a document by CEPS (Centre for European Policy Studies), “Supervising the European financial system”, Karel Lannoo, CEPS policy brief No 23, May 2002. 150 EEA country. 151 EEA country. 152 CESR was established under the terms of the European Commission’s Decision of 6 June 2001 2001/527/EC. 153 The scope of the activities of CESR was extended by Commission Decision 2004/7/EC of 5 November 2003 amending Decision 2001/527/EC establishing the Committee of European Securities Regulators. 154 CEBS and CEIOPS were established on 5 November 2003 under the terms of the European Commission’s Decisions 2004/5/EC and 2004/6/EC respectively. 53
Page 1: September 2006 RESEARCH A COMPARATI
Page 4 and 5: IE UK FR BE NL LU DK DE SE CZ AT SL
Page 6 and 7: The following WSBI/ESBG committees
Page 8 and 9: 4 Regulation and supervision compar
Page 10 and 11: 6.5 Issues of competition in retail
Page 12 and 13: To finish, if we had to pick from a
Page 14 and 15: In the US, credit institutions have
Page 16 and 17: Following the same logic, the EU co
Page 18 and 19: In that context, it is tempting to
Page 21 and 22: 3. INSTITUTIONAL COMPARISON 3.1 Sec
Page 23 and 24: The market share of the US banking
Page 25 and 26: FDIC-insured commercial banks are i
Page 27 and 28: The subsidiary stock institution is
Page 29 and 30: Regulatory reform over the past thi
Page 31 and 32: State credit unions were first exem
Page 33 and 34: There has however been much effort
Page 35 and 36: 3.2.2.2.2.2 Ownership and corporate
Page 37 and 38: Hermann Schulze-Delitzsch and Fried
Page 39 and 40: In contrast, building societies in
Page 41 and 42: The commitment of savings banks is
Page 43 and 44: 4. REGULATION AND SUPERVISION COMPA
Page 45 and 46: In addition, for regulations define
Page 47 and 48: The European Parliament has to be k
Page 49 and 50: In fact, it should be mentioned her
Page 51: As far as coordination at the feder
Page 55 and 56: Another important factor in the cho
Page 57 and 58: In the European Union, contrary to
Page 59 and 60: Although younger than CESR, both CE
Page 61 and 62: 4.2.5.1.1.1.1 Limitation of the geo
Page 63 and 64: 4.2.5.1.1.3 Recent trend: regulatio
Page 65 and 66: Another important common feature be
Page 67 and 68: The best execution rule was first m
Page 69 and 70: 4.3.2.2.4 National Market System ru
Page 71 and 72: The ISD set a basis for the develop
Page 73: Best execution rules exist in both
Page 76 and 77: The decline of savings institutions
Page 78 and 79: Relative to population, the Europea
Page 80 and 81: 5.2.2 Size of credit institutions 5
Page 82 and 83: 5.2.2.2 European Union In Europe, t
Page 84 and 85: 5.2.3 Concentration and consolidati
Page 86 and 87: 5.2.3.2 European Union Average CR5
Page 88 and 89: In terms of the nature of consolida
Page 90 and 91: 100% Graph 9: Structure of the asse
Page 92 and 93: In terms of growth of the volume of
Page 94 and 95: 5.3.2 Efficiency of credit institut
Page 96 and 97: Table 16: Evolution of the Return o
Page 98 and 99: Finally, looking at cost-income rat
Page 100 and 101: 9. The last couple of decades have
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102
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Furthermore, the average outstandin
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Under an open-end credit, the credi
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Table 19: Evolution of outstanding
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6.2.1.2.2 Regulatory framework over
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6.2.1.3 Comparison 6.2.1.3.1 Size o
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In terms of market competition, the
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The residential mortgage market in
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Funding by retail deposits represen
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In sharp contrast, the US mortgage
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6.2.3.1.2 Lenders to small business
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The securitisation process requires
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Factoring is also continuously gain
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6.2.3.2.4 Securitisation of small b
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The above fears can hardly be allay
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- ACH credits and debits: the stati
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6.3.2.1.2 Financial intermediaries
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It should be noted that two of the
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Assuming that technology, globalisa
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The report adds: “although it bou
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Graph 19: Use of different distribu
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In terms of funding of the business
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Since then, established banks have
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148
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MoU Memorandum of Understanding OTC
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Annex 2: Statistical appendix Table
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Table F: Share of US banking indust
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Table L: Structure of the liabiliti
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Table R: Number of ATMS in the EU a
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F - Federal Deposit Insurance Corpo
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A comparative analysis of the US and EU retail banking markets - Wsbi

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