The financial sector has been under considerable pressure in the past decade. Businesses, citizens and national authorities have been affected by the financial crisis. Challenges on development of new technologies, the fragmentation of the EU markets and climate change continue to exist. More recently, re-emerging risks for the financial sector will need to be addressed as part of the EU economic recovery efforts.
To address the current challenges and to seize new opportunities, the EU has adopted various initiatives. These initiatives have resulted in new and complex legal frameworks requiring implementation at national level. The Commission provides technical support to EU Member States across a broad spectrum of reforms in the financial sector. The technical support is focused on strengthening the sector’s oversight, responding to the quickly changing market and supporting broad financing options for the real economy
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Banks
Maintaining an efficient and reliable banking system is important for achieving sustainable economic growth. The market environment is shaped by new digital technologies, dynamic consumer preferences, increasing competition and changing regulations. Supervisors therefore regularly assess and adjust supervisory practices to ensure effective stimulus and monitoring of the banking sector. In doing so, they have to strike the difficult balance of strengthening the institutions’ resilience without undermining their business sustainability.
EXAMPLES OF SUPPORT
- Prudential supervision Implementation of the European Banking Authority’s guidelines, supervisory manuals and training; development of models supporting supervisory assessment.
- National Development Banks (NDBs) Developing internal assessment tools, improving organisational structures, capacity building.
- Data management and software infrastructures Improving software infrastructure and analysis and enhancing prudential reporting set-ups.
- Payment systems Assessing payment infrastructures, developing e-payment strategies.
- Non-performing loans Developing supervisory tools to reduce the level of non-performing loans and assisting in the establishment of asset management companies.
The Commission supported the Bank of Slovenia in developing two models, one for liquidity and one for interest rate risk management of non-maturing deposits, to assess the bank’s asset liability management.
Insurance undertakings and pensions
The Commission supports supervisors across the EU to design and implement various parts of Solvency II, the well-known regulatory regime for insurance undertakings. In doing so, it takes into account the needs and specificities of the local insurance market.
The Commission aims to contribute to best-in-class insurance supervision while ensuring convergent application across the EU. These efforts improve financial stability and enhance the role of the insurance and pension funds industry in funding our economy in a sustainable way.
EXAMPLES OF SUPPORT
- Improving prudential supervision in core areas such as solvency, stress testing and risk management.
- Capacity building in the area of conduct supervision.
- Addressing emerging risks, such as digitalisation or sustainable investments.
The Italian insurance supervisor requested support to further enhance its market conduct supervision.
Capital markets
The Capital Markets Union is an economic policy initiative that aims to further develop and integrate EU capital markets. The goal of the Capital Markets Union is to promote cross-country risk sharing and to enable companies and projects to obtain diverse funding, regardless of their location in the EU. The Commission helps EU Member States remove barriers at national level that stand between investors’ capital and investment opportunities. It provides technical support in collaboration with the Directorate-General for Financial Stability, Financial Services and Capital Markets Union.
EXAMPLES OF SUPPORT
- Providing domestic capital market diagnostics with in-depth analysis of impediments to capital market development.
- Designing multi-year capital market growth strategies.
- Developing appropriate market infrastructures and market-friendly public policies.
- Designing and implementing a capital market development accelerator fund or a small and medium-sized enterprise (SME) equity support instrument.
- Developing supervisory manuals for capital market supervision.
The Commission is supporting national authorities in their efforts to improve regional capital markets in the Baltic States with the introduction of a regional covered bond framework.
Green finance
The European Green Deal and the EU’s sustainable finance strategy define the operational strategies for achieving a climate-neutral EU economy by 2050.
The Commission plays a key role in supporting EU Member States throughout the whole spectrum of reform actions that are needed to implement these strategies. The ultimate objectives are to reorient capital flows towards sustainable activities and to address climate-related risks faced by the financial sector.
EXAMPLES OF SUPPORT
- Helping to prepare sustainable finance action plans to identify barriers to sustainable finance and build the right capacity.
- Enhancing sustainability proofing for national promotional institutions.
- Implementing sovereign green bond frameworks.
- Supporting national authorities in the coherent implementation of reporting and disclosure obligations.
- Integrating climate risks into supervision.
- Providing capacity building, including training programmes.
The Commission supported the Spanish national promotional bank - ICO - in the design of a Strategic Action Plan for direct financing of more sustainable (green and social) activities and projects.
Insolvency and debt restructuring
Enhancing the robustness of insolvency frameworks is one of the EU’s main objectives to continue the integration of capital markets in the EU. Well-functioning insolvency frameworks are essential for the efficient allocation of capital in an economy. A solid insolvency framework is crucial for a good business environment. It supports trade and investment and helps economies to effectively manage non-performing loans. The Commission supports EU Member States in their efforts to design and implement reforms to ensure the effectiveness and efficiency of their insolvency legal frameworks.
EXAMPLES OF SUPPORT
- Modernising insolvency legislation and benchmarking national systems with other jurisdictions and international best practice.
- Introducing early warning tools, designing preventive restructuring frameworks and strengthening the framework for out-of-court settlements.
- Improving the institutional framework so that court systems can handle insolvency and restructuring procedures more quickly.
- Reviewing national frameworks for insolvency practitioners, enhancing enforcement, data collection and cross-border insolvency.
The Commission provided assistance to the Ministries of Economic Affairs and Justice in improving the preventive restructuring framework in Estonia and introducing a system of early warning tools so as to limit the unnecessary liquidation of viable enterprises.
Anti-money laundering
Risks of money laundering and the financing of terrorism remain major concerns for the integrity of the EU’s financial system and the security of EU citizens. The fifth anti-money laundering directive increases the transparency of beneficial information, gives financial intelligence units wider access to information, enhances the cooperation between supervisors and regulates virtual currencies and pre-paid cards. The Commission supports EU Member States in their efforts to transpose and implement the EU’s legal anti-money laundering framework in line with their national needs.
EXAMPLES OF SUPPORT
- Assessing risks for market licensing and registration systems.
- Preparing risk-based approaches for monitoring anti-money laundering and/or combating the risks of financing terrorism.
- Preparing national or sectoral risk mitigation action plans.
- Awareness-raising workshops and campaigns about anti-money laundering and the risks of financing terrorism.
- Preparing functional requirements for support software for anti-money laundering supervisors.
The Commission is helping the Romanian authorities to better understand internal and external money laundering and terrorist financing threats, and to align its anti-money laundering policies accordingly.
Financial literacy
The European Union’s capital markets are still relatively underdeveloped and remain fragmented across the EU. Financial education and literacy help to develop and deepen the Capital Markets Union. They are indispensable elements for improving consumer protection. The European Commission and international organisations strongly encourage the development of financial literacy and education in EU Member States.
The Commission helps national administrations to diagnose the levels of financial literacy amongst population target groups and to identify and address the needs demonstrated by these diagnostics. The Commission also supports EU Member States in creating dedicated programmes for improving financial literacy and education.
EXAMPLES OF SUPPORT
- Developing national strategies aiming at strengthening financial literacy, fostering responsible financial behaviour and increasing financial resilience.
- Implementing financial literacy strategies through the development of specific educational and/or communication tools.
Recent studies show that the Austrian population lacks financial knowledge when making financial decisions.
Crisis management
The financial crisis showed that some areas of the financial sector were not sufficiently regulated and that supervisors did not have adequate
tools to deal with failing institutions. To improve cross-border coordination and reduce future dependence on public money, the Bank Recovery and Resolution Directive (BRRD) fully reformed the EU framework for managing the failure of financial institutions. The Commission supports EU Member States in the design and implementation of reforms to ensure the effectiveness and efficiency of national recovery and resolution frameworks for financial institutions.
EXAMPLES OF SUPPORT
- Developing crisis management manuals to provide resolution authorities with step-by-step guidance on the use of resolution tools at national level and/or in a cross-border context.
- Carrying out crisis simulation exercises to test the operational preparedness of the national authorities for resolution.
- Helping to prepare adequate bank insolvency legal frameworks to ensure appropriate tools for swift and efficient procedures.
- Design of policy and legal measures for addressing legal and operational weaknesses and challenges, in the functioning of its deposit guarantee schemes.
The Commission supported the Czech National Bank (CNB) in its role as the National Resolution Authority (NRA) with the preparation of a Crisis Management Manual, containing detailed resolution guidelines for financial institutions in the Czech Republic.
Contact details
Head of Unit Financial sector and access to finance
LAURA RINALDI
Main contact point for applying for the Technical Support Instrument
REFORM-TSI
ec [dot] europa [dot] eu (REFORM-TSI[at]ec[dot]europa[dot]eu)
Further details on the work related to financial sector and access to finance
REFORM-FINANCIALec [dot] europa [dot] eu (REFORM-FINANCIAL[at]ec[dot]europa[dot]eu)
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