European Central Bank proposes adjustments to European Systemic Risk Board

The ECB was responding to a report produced in August 2014 by the European Commission for the European Parliament and Council.

The ECB said that in general it supported the conclusions of the Commission report. No far-reaching changes are needed to the ESRB legal framework and the ESRB has "on balance, functioned well".

Some changes should be considered by the European Parliament, the Council and the Commission, the ECB said. The ESRB needs better access to useful data and the roles and memberships of its general board and steering committee need to be addressed.

The ECB agreed with the Commission's report in several areas:

A continued close relationship should be maintained between the ECB and ESRB with the president of the ECB remaining chair of the ESRB general board.

Access to data must be improved for the ESRB. The ESRB has to date gathered data through "ad hoc" requests, making collection, processing and disseminating it "cumbersome", the ECB said. The "current restrictive framework for obtaining the relevant information needs to be revisited," to make provision of "firm-level" data more suited to the ESRB's needs by identifying sensitive data and ensuring confidentiality, it said.

The ECB suggests making a distinction between 'institute-to-aggregate' data, where one institution is reporting on information such as balance sheets and profit and loss accounts, and 'institution-to-institution' data. 'Institution-to-institution' data is likely to be more sensitive, and could remain under current constraints, but 'institute-to-aggregate' data could be shared more simply.

The role of the ESRB steering committee should be strengthened, the ECB said. The committee could then be used as a platform for the exchange of information on planned moves, before they are officially notified to the ESRB. The committee could take a more proactive, forward-looking approach in setting the priorities for the general board agenda, and in identifying the most important policy issues.

In response to a Commission suggestion that a full time managing director role should be considered, the ECB stressed that the ESRB must maintain a high-profile ECB presence in its decision-making bodies. If a managing director is appointed then the ECB would like to see the chairmanship of the ESRB general board assigned permanently to the ECB's president.

The general board and steering committee should also include Single Supervisory Mechanism representatives, the ECB said. The Banking Union was not yet in place when the ESRB governance arrangements were put in place, and changes are needed to reflect the current situation.

The 'addressees' of ESRB communications should also be reconsidered, to ensure recommendations are well targeted, the ECB said.

The ECB does not, however, support all the suggestions made in the Commission's report.

Proposals for more autonomy for the ESRB must be balanced by the fact that "an unwarranted degree of autonomy would be incompatible with the continued reliance of the ESRB on the ECB's reputation and expertise".

"The ECB remains well-placed to continue to ensure analytical, statistical, financial and administrative support for the ESRB in line with the existing arrangements," it said.

The Commission report had also proposed streamlining and reducing the size of the general board, but "the ECB considers that there would be only very limited opportunities to reduce membership". In fact, it says, "all macro-prudential decision makers", including representatives from all European System of Central Banks and national macro-prudential bodies should be included, "although not necessarily with voting rights".

Increased ESRB involvement in the Union legislative process, as suggested by other respondents to the Commission's report, is not necessary, the ECB said. While the ESRB's expertise would be valuable in discussion's of Union initiatives, "there is no need to establish a formal role for the ESRB", the ECB said. "The ESRB may provide its input ... by highlighting to the Commission areas where future legislative action may be necessary."

The ECB has also asked for additional clarification on proposals to expand the ESRB's 'toolbox'. Alongside the current warnings and recommendations, the Commission report proposed to add 'soft powers', such as the publication of letters or statements.