 Yn wych. Rwy'n gynghwyl i'r newid. Fel hynny'r ber hál o'r awrthyniedig, rwyf ar eto gyda, mae ydych chi'n gwneud y peth yn hyfrwg anniad, mae hynny'n ddyn i'r awrthyniedeb, a gennym. Y rheid i'r ddwell i'r ddweud yma eich hôl yn edryd, nid yw i'n gwybod i'n cyfnod yma, ac rwyf yn dahl i'r ddweud, Ond mae'n fawr i'ch byw i'r ddweud yw dr Adam Farcas. Mae'n ddweud y dywedodd gyda'r dyfodol gyda'r ddechrau yng Nghymru. Mae'n ddweud ychydig yw'r ysgrifennu, mae'n ddweud i'r ddweud yw'r ysgrifennu. Mae'n ddweud i'r ddweud, ond mae'n ddweud i'r ddweud i'r ddweud. Mae'n ddweud i'r ddweud i'r ddweud i'r ddweud i'r ddweud. Mae'n ddweud i ysgrifennu sy'n bod yn ddweud y dywedodd gyda'r ddechrau ysgrifennu, ond rhai'r ddweud yw'r ddweud yw'r gwefan. Mae'n ddweud ysgrifennu sy'n bod yn ei gwybodaeth eu gwasg yn ddweud yn ddweud â'r ddweud. Mae'n ddweud i'r ddweud a chael gwneud yr eich ddweud. A ddweud yr yr Eilam Bob. Mae'n ddweud Ieitha. Mae'n ddweud i'r ddweud. I have the presentation here. Thank you very much for having me. This is not the first time I've been invited. So I'm not saying I'm a regular, but I'm coming back with really good memories and memories of lively and interesting discussions. And I remember in, I think about four or five years ago when I first came, it was really about introducing what the EBA was and what we were up to and what we were planning to do and how we are setting ourselves up and how we grow as an organisation, a newly-founded organisation. Today, I think we have passed that mark. The work of the EBA is widely known. So what I would like to talk about today at the request of the Institute and the organisers is how we see the EBA's role in fostering future convergence in Europe, in banking regulation and supervisory practices. And of course, I will also talk a little bit about how Brexit comes into this mandate, which was as much of a surprise to you as it was to us when it happened, given that we are seated in London. Therefore, we had the first-hand experience of waking up on that Friday morning and learning the results of the referendum and taking the first underground to see other people's reaction as well. So I will talk about these three topics. And I will try to focus on the current work of the EBA and the future, so in a sense, introducing what you can expect in the near term from the EBA. Again, in the regulatory, in the rulemaking area, sort of completing the single rule book in Europe. Then in supervisory convergence or superval... ..the putting pressure on the supervisory authorities to converge their practices in actual implementation. And then I will talk about how Brexit impacts all of these objectives and the work of the EBA very briefly. And then I will be very happy to answer any questions you may have. So let's first look at the rulemaking. As we all know, what Europe is doing in banking, in prudential... I'm talking about prudential banking regulation, not about payments or resolution or other just pure prudential banking regulation. The European Union committed to the global process of the post-crisis reforms and committed to implement the Basel agreements, which is the global standard-setting body for prudential rules in the context of the post-crisis reform. As you all know, and I'm not going to talk about history, but as we all know, the last elements of the so-called Basel 3 package, industry calling it Basel 4, sometimes we called it Basel 3.5, but we know what we are talking about, is the last elements of the post-crisis reform were agreed in late 2017, and the Basel committee published the last components of the post-crisis reform package in prudential regulation. What it entailed or still entails is the revised standardized approach of credit risk, so it was really focusing on the risk-weighted asset side on the nominator side. The revised standardized approach, the revised internal model-based approach for credit risk, it also changed fundamentally the op-risk framework, and it went into reforming or revamping the fundamental review of the trading books or the market risk framework, including the credit value adjustment framework and also the general counterparty credit risk framework. Also, the G-SIP surcharge, the G-SIP framework, the global systemically important bank add-ons have been reviewed and a new framework was published. One of the most controversial, all of this is to be implemented by 2022. There is one other big, which was the last sticking point in the negotiations, and I remember the discussions. The 72.5, of course, is not a scientific outcome of this, and output floor is introduced on the risk-weighted assets, but it will be introduced very slowly over a period of five years, and the level of the output floor is 72.5%, which means that the risk-weights given by a particular bank, by the standardized approach and the IRB approach, cannot be too distant from each other. The floor of the IRB is 72.5% of the standardized outcome. But because it was so difficult to achieve, there was one additional softener put into the agreement, which is that even in this transition period, the jurisdictions will have a discretion to contain the amount of capital requirement increase over this period of time, so if it was too aggressive, they can cap the capital increase in this transition period so that to avoid a sudden increase, a sudden optic of capital requirements. It's very important. Two points I want to make about the BASA requirements is that it's not yet finished to the full. There is still an outstanding work stream in the market risk area, and if you have any interest, I'm happy to talk about the details of that, which needs to be completed, or the commitment is that it will be completed by the end of this year, and this involves the finalization of the FRTB and also the standardized approach on counterparty credit risk. Everything which I will say subsequently is conditional on this being finished by the end of the year, because otherwise it will not work. The last point I want to make on the global reform agenda is that the treatment of sovereign risk in the prudential framework of banks, as you all know, there is a debate about this in Europe, and there is a debate about this in the global fora, but it's not part of this package, so it is not going to delay the implementation. There is no agreement on this. There is a paper published by BASA. There are political discussions and economic discussions in Europe about this, but any change of the sovereign treatment is not part of this agenda. If this happens, it will happen subsequently after the implementation of this package. Very quickly, the view of the EBA on the need to implement the BASA rules. We have a very strong institutional position on this one, and this has been very consistent. We are a strong globalist, so we are very strongly in favour of having global standards and allowing banks, international banks, to grow cross-border, provide cross-border services, reallocate savings to investments on a global scale, or international scale, or a cross-border scale, but the condition for this is that there are some global, some global minimum standards that all banks who are active internationally have to comply with. The reason is, of course, is the lesson from the crisis because some of these global banks were serving as a channel of contagion of the risks in the financial crisis, so to prevent that and to ensure that they are financially stable, these standards need to be applied globally. We think that Europe, as a large jurisdiction and a large home to significant international banks, should be genuinely committed to implement these global standards into the rulebook of European banks. We are very definite on this for the globally systemically important banks, so the real, really big ones, but we think that Europe should pay some attention to see if this is true for everybody else as well. And on this one, we have an open mind, and I will talk about what we are planning to do, we have an open mind to investigate whether specific business models or types of institutions could have a proportionate application of these global standards in order to reduce the regulatory burden on especially some of the smaller institutions. However, it's important that when I talk about proportionality, I'm not talking about reducing potential standards or undermining potential requirements, I'm talking about the proportionate application of global standards, a simple application of global standards to potentially to certain institutions. Now, there should be a slide after this, that's it. So what we are going to do, I started to grow concerned because I didn't say it, it jumped. What we are going to do in this framework, and this is definite information, so this is something you can use and quote. The commission is, because it has happened, the commission has issued a call for advice to the EBA, it's a large one, I think we have already published it, but if not, we will publish it imminently. It's a long document, the commission is asking the EBA to create a large report or to draft a large report assessing the impact of this last remaining package of Basel measures to the European Banking System. So we are going to make a massive study to demonstrate how this package is impacting the European Banking System. To that effect, we are going to run a data collection exercise and then a number crunching exercise within the EBA over the next year, more than a year. The report is to be submitted by end of June next year when, as we all know, there will be a parliamentary recess in the European institutions, so there will be no legislative action in that point. That's why we have to do this work right now because we want to prepare the commission services so that when the new commission is on its feet in late 19 or early 20, then a legislative proposal can go straight ahead and the implementation can be put into the European law. The data collection exercise, it's very important, will involve a larger sample than the Basel sample. The Basel committee is going to do its own QIS starting from mid-summer. We will completely align with this QIS but extend the sample and extend the data requirements somewhat, but minimal compared to the Basel templates. We are thinking about 400 banks in Europe to represent different business models and different sizes of these institutions and different geographies of these institutions. Of course, when we do sampling, we always talk to the supervisory authorities to actually select the banks who will be in the sample. What we try to do is to measure the impact of this package to all these business models which we have identified. As a point of reference, if you look at the EBA's report on the NSFR, the SCR, the leverage ratio, we identified about a dozen business models and we measured the impact of these individual measures or individual standards on these different business models. That's exactly what we are going to do now in the context of this entire package, so we will try to identify how these different types of institutions from a small cooperative in the Baltic countries to a relatively small universal bank in Malta, to a medium-sized bank in Ireland, all the way up to the global syffies of Europe will be measured and looked at. So that's what we plan to do. The, again, as I mentioned, the report is due by June next year and it will be published in full. We might even try to do limited consultation along the way if we see something that would require engagement with the industry, but we are not promising a full scale, full consultation on the report. On the basis of this report, the plan is that the commission will prepare a legislative proposal in the services and once the new commission is out, a legislative proposal will follow and that will allow, subject to, of course, the political legislative process, it will allow the implementation to kick in from January 2022, which is the Basel deadline, so Europe will, in this way, will be able to meet its international obligation on implementing these standards. Now, one sensitive political issue here, which will come up, is the, how the discresions are exercised in Europe, which are provided in the Basel text. If somebody reads the Basel text, there are lots of discresions to individual jurisdictions who implement these standards in many areas and I will not want to name individual areas, but there are some significant ones. And, of course, in Europe, the question will arise, should we exercise these discresions at the European level, so one single exercise, or should the European legislation sub-delegate this to national level? I don't think there is any doubt what my view is on this one. So we will make proposals on this, but, of course, a proposal from the EPA is no guarantee for success, but this will be a very interesting point of the legislative discussions when it gets there. Of course, what the EPA is expecting is from these legislative proposals, some technical standards and guidelines will spin out of this, so we will have level two work and level three work stemming from these proposals. But once this is completed, and again, the idea is to complete it sometime by 2020 or mid-2021, we consider that this will conclude the post-crisis wave of prudential reforms that were agreed in the G20 context and followed through in the Basel standard setting process and the implementation in different jurisdictions. So this will be sort of the conclusion of the main strand of changes in prudential rules, and we are an integral part of this and the key player in this process. Now, let's assume this is closed and this is happening as planned. What else I'd like to talk about and very briefly is what we do see in the horizon for the future in regulatory convergence, what is coming on stream these days. One clearly is sustainable finance or green finance. We are all familiar with the commission's action plan to introduce sustainable finance into the European legislative agenda, including introducing it to the prudential framework of financial institutions or insurance, banking and capital markets. There is a published action plan of the commission and there is a clearly defined role for the EBA and for the other ISAs in this action plan. We will be playing a key role in creating or drafting the taxonomy of what is sustainable, what is a green investment, because, of course, to do anything in the prudential framework, you need first taxonomy and definitions, so that will be the first step. The next one will be where we lend our expertise to this overall process in designing products that can be considered as green investments for loans or for insurance of bonds or for any contracts that are investable by insurance companies. We will try to give prudential advice on what asset classes can be included in these products and what is the eligibility criteria based on the taxonomy. We will talk about the structural and standardisation features of these products. We will talk about disclosure requirements and due diligence requirements that would normally be defined, for example, in securitisations or covered bonds or other similar structures. We will help creating this taxonomy and investable products, financial products, based on the taxonomy that would support the sustainability of our planet by allowing financial institutions to invest in these in a regulated way. Then, of course, there will be discussions about the prudential treatment and other things, whether they will come at a later stage. This is something that is in the pipeline. The second one, and I will try to be as short as possible on this because this could take a day, is proportionality. It's very clear that in the European discussions on financial regulation, proportionality is becoming more and more a central point of focus of the policy discussions because it's very clear that in the way following the financial crisis, the implementation of prudential rules was not, let's say, not considering proportionality as the highest priority and that clearly has some side effects for certain segments of the market in the way of overly complex and cumbersome regulatory requirements and, therefore, again, I would repeat myself, we have to make efforts and this clearly will be a priority for us on the way forward to identify how we could have better regulation in terms of applying proportionate requirements without jeopardizing financial stability or undermining the prudential standards. One area which I put on this slide is reporting, which is a clear example, proportionality in reporting should not mean that banks who are small should not report. That's the important thing. Proportionality must be based on maximum harmonization and the illustration, the example I put up here, is that in 2011 in Europe, and this is unbelievable, in 2011 we did not have a single definition of what CET1 is, so we did not have a single definition in the EU what the highest quality capital of a bank is. It was not defined uniformly in the EU in 2011. In 2013, and we all remember the discussions on NPLs, we did not have a single definition of what NPL is in the EU. We were talking about NPL ratios and compared countries and banks, analysts were in and out of the market with all sorts of charts and comparisons, but in the EU we did not have a single definition of NPLs. I could go on and on and on and on. It is really important that first we need to arrive to single definitions and a consistent definition of aggregates before we can talk about proportionality because without this maximum harmonization of definitions and standards, we cannot really genuinely maintain comparability with a proportionate application. In our view, proportionality needs to be based on maximum harmonization and needs to be driven by the same definitions, but with a proportionate application of the requirements based on the same definitions and the same potential standards. In reporting we are progressing and trying to make progress to apply this principle. Again, if you have questions, I will be happy to go into some of the details. Last topic, because this is much more wide-ranging, I think the EBA will have a lot of role in the completion of the furthering of the financial integration in Europe, mostly focusing on the deepening of the integration in the banking union. We all know the legislative trains that are in motion right now, the CRD-5 CRR-2 package. This is in a political discussion now. This will imply work for the EBA. There are discussions on EDIS. There are discussions on potential backstops for EDIS and for the Resolution Fund. There is an action plan in MPL reduction, which is still on the agenda in Europe, and there are discussions within the European context on sovereign exposures and how to treat them. These are all future or ongoing work streams. We will have a key role in some of these topics in the rulemaking area. I'm pretty sure there will be questions relating to these specific packages after I finish my remarks. Next topic is summarising the rulemaking. You can probably have a feel that, despite the fact that one would expect that the rulemaking role somehow plateaus out after a crisis, we are nowhere near to that point. We are expecting still a lot to come, but at least the clarity on what is coming is now much better than a few years ago. Next topic is supervisory practices. So what do we do to try to ensure that these rules, which are all very nice and single, how are they put into supervisory practice and how consistency is ensured? To this end, what we try to do is to have a systemic approach on the work of the EBA on supervisory convergence. The frame of this work is that we issue regularly, we try to do it annually, but we don't commit, but we do a report on the convergence of supervisory practices in the EU on an annual basis. So we issue one in 15, one in 16 and one in late 17. What sort of tools do we have to try to further or foster supervisory convergence, given that we are not direct supervisors? So we are not supervising any single firm in the European Union. We are our clients or our counterparts on the supervisory authorities, so the SSM and the other national supervisory authorities. First of all, the first tool is of course the single rulebook, the regulatory tools, I mentioned those. Second one is training. We are expanding our training offering in supervisory areas. And the third one is monitoring and assessment, and that is becoming more and more important. Under monitoring and assessment, what we try to do is we run peer reviews of the supervisors. We do staff reviews on desk based, so we just take a topic, a sort of thematic selection of different topics, and we try to do a staff review after some gathering of information and engagement. And we produce reports, some of them are confidentially fed back to the supervisory authorities, some of them are distilled and then published. Then we monitor supervisory colleges in Europe, so we attend the largest supervisory colleges. And we also run staff reviews, onsite staff reviews of some of the supervisory practices which we want to look at. In 2017, we issued a report, the latest one, and it was focusing on the Shrep practices, and those of you who are not familiar with everyday banking supervision, the Shrep is the pillar to process, the supervisor review and assessment process. So that's how the supervisors decide how much bank-specific, idiosyncratic capital requirements and guidance is to be added to the minimum capital requirements of banks. So that was the focus. Second one is internal governance, how internal governance is assessed. And I wouldn't want to mention the recent cases in AML and other related issues where clearly we are seeing some, let's say at least we are raising some questions about how the internal governance structure is supervised in banks by the different supervisors. We did an assessment of recovery plans and we are doing a benchmarking of the model outcomes of internal models. So we compare what banks are coming up with in terms of the assessment of portfolios by their internal models to come to risk-aided assets and capital requirements. So we compare this and we are providing feedback. Again, all of this is to try to see how consistent supervisors are when they are putting into practice what we produce in the rule books in the form of level two or level three guidelines. So this was the focus for 17. What we are going to look at in the future, so on the way forward, it is very clear that the strap is key and of course there is one elephant in the room which is the SSM in the strap process because the SSM is now, after Brexit, the SSM will supervise about 90% of banking assets in Europe. So there will be one single supervisor who will have a direct or indirect responsibility for the largest chunk of European banking assets. Therefore, the methodology defined in the strap guidelines and how it is applied will be critical and we have to make sure that it is applied in line with what we intended to do or if it needs to be reviewed, then we review it together with the supervisors. There are questions or let's say there are inconsistencies identified in our report about how the ICAP, the internal risk assessment models of banks is being used by the supervisors, how they rely or don't rely on this. There is a debate about how transparent the supervisors should be with respect to the pillar two requirements and how detailed and granular that transparency should be towards the banks and towards the general public. There are very different views on this in Europe and different practices in supervision. Even within the Banking Union, there are, let's say, national cultures still prevailing that are different and I'm not trying to say what my personal view is. What we see is that the practice is not consistent and there is another interesting area which is that some of the authorities are proposing to use pillar two and pillar two requirements for macro potential purposes and initially, as we know, pillar two was not designed for macro potential purposes but some of the authorities are insisting that it has to be factored in and macro potential consideration should come into the pillar two requirements. So there are, let's say, I identified some topics that I would consider them hot topics or topics of interest for further review and look as to how consistent practices are. We have a pillar two roadmap. When do I have to finish? In ten minutes. Two or four minutes. We only have Brexit left. So we have a roadmap and we are sort of following this roadmap to go through topics after topics to look at these issues and the last point I would make is that we are putting more resources on the way forward to training so we will try to increase especially online training which can be more effective in reaching more supervisors than in-room training. So last topic for three or four minutes. Brexit. I have three slides on Brexit. One is the expected Brexit impact in the area of banking and I don't think I will say much of new information in here. It is clear that Brexit in the area of banking or financial services in a broader sense has a major impact because the UK and London in particular is the largest financial centre in Europe. This is something of a fact. It is also true and without prejudice to the political discussions we don't know where they are going to end up but without prejudice to the outcome of these political discussions it is very clear that if Brexit goes ahead the access of UK-based financial service providers in the way of free-passporting will be curtailed. It will not be the same as it is today. Again, we don't know exactly what it will be but it will not be what it is today and it will be curtailed. The third point I would like to make and on the EU 27 side this point has been made repeatedly is that different scenarios are possible and of course we all monitor the political progress and we all welcome any progress that is being achieved but unfortunately among the plausible scenarios there is still one which is the most negative which is called the cliff edge or the heart Brexit or a no deal scenario and therefore we have to be prepared for even the worst outcome ourselves and the industry needs to be prepared for even the worst outcome of the process. Again, I say this with regret but this is the share fact. We are putting out a lot of communication and engagement to the industry to make sure that the private sector is also prepared for the impacts of Brexit and to the reduction of mutual access to the markets because it's not only impacting UK based institutions but it's also impacting institutions in the EU 27 who use London for various purposes and I would mention four areas which are critical in this and disputed or let's say controversial of how this preparation should take place one is the area of contract continuity especially in the case of the worst outcome the second one is data transfer the third one is FMI financial market infrastructure access of the firms and the last one is access to funding markets of clients as well as financial institutions so these are the key areas of preparation that needs to take place in the context of Brexit. There are of course different views as to how much the preparation or the necessary action should rest on the shoulders of the private sector as opposed to the public sector in these areas there are disagreements on this around the discussions but nobody disputes that these topics these risk issues are there and need to be addressed. Brexit impact on the EBA again very briefly the EBA we have already gone through some changes some fundamental changes when the banking union was created that we had to reposition the EBA significantly and this Brexit will mean another repositioning of the EBA because pre Brexit with the banking union we had a very strong role to ensure this bridging between the ins and the outs so the eurozone members or the banking union members and the non banking union members now with the UK leaving the balance will tilt very strongly towards the banking union so this bridging function of the EBA although it will remain because there will be outs till but their weight and significance will reduce this bridging function will shrink in the mission of the EBA so the other thing which will happen is that there will be a shift from the rulemaking to ensuring that the rules are consistently applied in supervisory practices the third one again as a consequence of Brexit is that the role of the EBA in supervisory colleges will reduce so there will be less cross border colleges which would involve other jurisdictions than banking union jurisdictions so of course there will be a few but the number will shrink in terms of significance so that work of the EBA will also reduce somewhat there will be one important function or task of the EBA which will increase or expect it to increase and this is equivalence so it's very clear that the role of the EBA in third country assessments and possibly monitoring on a continuous basis will increase and this is sort of boosted by the Brexit process again without prejudice to what exactly the outcome is going to be and of course there is one last point is that the EBA itself will be relocated from London as we all know but I don't want to talk about that it's trying to avoid a subject now Brexit related EBA work what we are doing in the context of Brexit we do regular risk assessment especially focusing on cliff edge risks so focusing on the worst case scenario we have a system of monitoring relocation decisions restructuring of banks and of course Dublin is one of the major centres in Europe which is having a lot of action these days we are providing guidance on outsourcing which in the context of Brexit became a very hot topic after sitting on very low in the priority lists of supervisors we are also providing guidance on back to back transactions to understand booking models and how different entities in the financial sector operate and what models we can use we are doing internal preparation within the EBA for future supervisory cooperation which eventually will need to be put in place and we also took some organisational changes within the EBA to reflect the shifting priorities and different changes in our expected changes in our mandate so we are very active ourselves with respect to Brexit not only the industry and other supervisors at Exit and this is the last slide so I will stop here and open for questions