ECB Annual Report on supervisory activities

Finally, the ongoing cooperation between the <strong>ECB</strong> and the NCAs is supported by
continuous efforts to further align the processes and methodologies for supervising
the LSI sector. The NCAs’ supervisory activities and tasks in respect of LSIs and the
analysis and identification of risks and vulnerabilities in the LSI sector are regularly
summarised, inter alia, in the form of dedicated reports, which are shared with
supervisors across the euro area. Cooperation and interaction also relies heavily on
sharing and exchanging data. Towards that end, the <strong>ECB</strong> and the NCAs are
developing mechanisms to enhance the exchange of information.
Box 1
Institutional protection schemes
Significant advance in work on institutional protection schemes that began in 2015 17
In some Member States, savings banks and cooperative banks have established institutional
protection schemes (IPSs). These IPSs protect their member institutions and, in particular, ensure
their liquidity and solvency. Overall, 50% of the euro area’s total number of credit institutions are
members of an IPS, representing around 10% of the banking sector’s total assets. Work that had
started in 2015 on the development of a common approach towards assessing IPSs, with a view to
establishing a consistent supervisory treatment of IPSs across the euro area, was completed in
2016.
Guide on the approach for the recognition of IPSs for prudential purposes
A guide on the approach for the recognition of IPSs for prudential purposes was developed in the
context of the <strong>ECB</strong>’s work on options and discretions available in EU law. Following a public
consultation, the guide was finalised and published in July 2016. The guide seeks to ensure
coherence, effectiveness and transparency regarding the supervisory policy that will be applied
when assessing IPSs. This is of particular importance as the official recognition of an IPS leads to a
different treatment of some of the prudential requirements under the Capital Requirements
Regulation (CRR), namely a 0% risk weight for exposures to other IPS members and the removal of
limits on large exposures to other IPS members.
Coordination and cooperation for “mixed” IPSs regarding decision-making and ongoing
monitoring
IPSs typically consist of both significant institutions and less significant institutions (“mixed” IPSs). It
is therefore particularly important that both the <strong>ECB</strong> and the NCAs treat IPSs in the same way. For
this purpose an <strong>ECB</strong> guideline addressed to the SSM competent authorities (comprising the <strong>ECB</strong>
and NCAs) was adopted and published in November 2016. It sets out the principles for coordination
between the <strong>ECB</strong> and the NCAs on IPS-related supervisory decisions and for the ongoing
monitoring of IPSs. It ensures that NCAs apply the same criteria when they assess IPS applications
from less significant institutions. In addition, monitoring groups made up of <strong>ECB</strong> and NCA staff were
established in 2016 and have started their monitoring activities. The <strong>ECB</strong>’s guideline does not affect
IPS approvals that had been previously granted. However, a reassessment may be considered in
17
The work conducted in this respect was described in the <strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities
2015 page 43.
<strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial
stability 30