Europe - 10 years after the Great Financial Crisis, what has changed in banking regulation and supervision, and what are the new challenges?

BCBS-FSI high-level meeting on banking supervision, Basel, Switzerland, 17-18 September 2018.

What has changed since the Great Financial Crisis (GFC) a decade ago? Have the changes in regulation, supervision and bank practices helped to create a more robust and stable financial system What hurdles do countries face in implementing the new regulatory standards? What are the effects of fintech? What should the response to these and other new challenges be?

These and other questions were tackled at the FSI high-level meeting for Europe, which took place in Basel on 17-18 September 2018. Jointly organised by the BIS's Financial Stability Institute (FSI) and the Basel Committee on Banking Supervision (BCBS), the event brought together top officials from financial authorities to exchange views on the latest regulatory developments and regional supervisory priorities.

The background to this meeting were the changes in regulation at the global and regional level, in supervisory practices and in banks' business models since the GFC. In Europe, related discussions have taken place against the backdrop of concerns about financial fragmentation, both within the region and globally, and institutional changes to deal with weak banks that are failing or likely to fail. With increased regulatory responsibilities for banks and supervisory authorities, European supervisors are seeking to align supervisory intensity with the riskiness of banks' business models and to assess the sustainability of bank business models. 

Europe has emerged from a decade of deep financial stress, and has implemented far-reaching financial sector reforms, including in dealing with failing or failed banks. The challenge is to complete the reform agenda and retain a level of supervisory pressure that is proportional to the risks inherent in banks' business models.

Fernando Restoy, Chair of the FSI

During the high-level meeting, banking supervisors from the region and beyond shared key lessons from their response to the GFC, and acknowledged common regulatory and supervisory challenges.

With the Basel III package now complete, focus has shifted to implementing the new regulatory standards, but this will require time and resources. Regulation needs to keep up with new challenges in the industry, for instance in relation to financial technology.

William Coen, Secretary General of the Basel Committee

In the discussion on bank resolution regimes and early supervisory intervention, the FSI highlighted its findings from a forthcoming FSI Insights on bank insolvency regimes. Given that bank resolution is the exceptional case in dealing with weak banks, making insolvency regimes more effective can better preserve value and protect banks' functions in the economy. In addition, in relation to the discussion on proportionality in banking regulation, the FSI presented preliminary findings of the recently conducted survey on proportionality practices in non-BCBS jurisdictions.