The FROB asks for more power or to join the Bank of Spain

The appearance of the president of the FROB, Paula Conthe, in the committee on democratic quality in Congress had raised considerable expectations.

The merger of CaixaBank with Bankia, in which the State controlled almost 62% and after this corporate operation, public control has been diluted to 16.1%, the next exit of Sareb’s banking to remain in fully public hands, or the vote for or against the remuneration of the CaixaBank leadership (salaries criticized by the Government) at the banking giant’s meeting on Friday, were some of the issues that focused the attention of politicians. But the head of the FROB chose not to go off script.

He only responded to questions related to the commission. Although his intervention, the first in which he intervenes in Congress after replacing Javier Ponce in office (before his appointment he already attended as a candidate for the position), did not leave the deputies indifferent. Conthe has asked that the Spanish rescue fund have more powers in terms of bank resolution and continue to act as an independent entity or, on the contrary, become part of the Bank of Spain.

He considers that the Spanish entity resolution model operates with reasonable efficiency, however “there is room for improvement,” he explained during his appearance, which has barely lasted a little over an hour.

In his opinion, the division between the preventive resolution function of the Bank of Spain and the National Securities Market Commission (CNMV), and the executive resolution function that corresponds to the FROB, is often “artificial”, which can generate Confusion in the allocation of responsibilities and operationally can lead to duplication and waste of synergies.

Therefore, although he believes that this division made sense at a conjunctural moment, he suggests that in the medium term the preventive and executive resolution functions should be integrated into the same authority, as recommended by the International Monetary Fund (IMF).

Conthe considers that the integration of resolution functions could be done through two options: with greater powers to the FROB, or with integration into supervisors.

The first would mean giving more power to the FROB, by incorporating the powers of preventive resolution that the Bank of Spain and the CNMV now have; The FROB would thus become the reference authority in matters of resolution, with a “clear and univocal” mandate. The main advantage is that it allows safeguarding in a “clear and unequivocal way the principle of independence and the separation between supervisory and resolution functions”, explained Conthe.

The pitfall is that with resolution and supervision functions in two independent authorities, the FROB would still not have access to updated supervisory information. In addition, there could be duplications due to the need for greater coordination. This is the model chosen in the Banking Union with the Single Resolution Board as the central resolution authority.

As for the second option, it would consist of the resolution departments of the Bank of Spain, or the CNMV, adding the executive resolution functions of the FROB. The advantage is that the resolution function has easier access to up-to-date information and specific supervisory insight and knowledge, which aids in planning and enables real-time monitoring in the event of a deterioration in the situation. an entity, has explained.

This is the model for most countries in the European Union and for Japan, Brazil, Hong Kong or Singapore. In most cases, the assumption of the new resolution function by the supervisor led to an in-depth review of processes, internal regimes and governance policies.

The objective of these changes is to guarantee an adequate functional and organic separation between supervision and resolution to avoid possible situations of conflicts of interest.

Agility to manage the crisis

FGD. Paula Conthe recalled yesterday that deposit guarantee funds are still national and in order to create a “coherent” crisis management framework, without differences between countries, it is necessary to advance in the European Deposit Guarantee System (EDIS), the latest pending pillar of the Banking Union. He drew attention to the need to provide Spanish regulations with “agile and efficient” instruments and procedures to manage the crisis of credit institutions or investment companies.

Remuneration. The FROB will have to vote on Friday whether or not it is in favor of the salaries of the CaixaBank leadership. The FROB, dependent on the Economy, knows and approved the salary of the executives in the council of the entity on March 30. Economics has criticized the “unacceptable” remuneration of the bankers.

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