1

Introductory remarks

European legislative initiatives

Jerzy PruskiBank Guarantee Fund

Poland

EFDI - IADI Conference Strengthening Financial Stability – Deposit Insurance Contributions

Rome, 1 October 2010

European UnionRisk areas

2

Risk sources - main areas

3

Limiting risk requires actions in three areas:

1) domestic markets2) cross-border issues3) large financial institutions

Broad range of benefits of globalisation

• Insufficient information • Crisis contagionGlobal economy

Harmonization and common EU financial stability rules

4

Basel III

Assets transfer

„Living wills”

DGS Directive

Resolution funds

European initiatives

Domestic markets

Cross-border issues

Large financial institutions

Area not addressed

Cooperation

EU institutions, e.g.:ECB - European Central BankESRB - European Systemic Risk BoardEBA - European Banking Authority

European UnionLarge banks perspective

5

Banking sector size and concentration

6

Banking sector size to GDP (% )

478

373

360

354

329

312

168

75

502

0 100 200 300 400 500

Poland

Italy

Spain

Ireland

Belgium

France

Germany

UK

Netherlands

%

Differentiations

- banking sector asset size

- proportion of potential risk to banking sector asset size

- proportion of potential risk to GDP in different states

Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010)

12% 16%27%

39%

63% 66%

95%108% 109%

121%

170%

203%

332%

309%325%

269%243%

158%

120%107%

91%

39%43%28%

0%

50%

100%

150%

200%

250%

300%

350%

Poland

USA

South

Kor

ea

Japa

n

Germ

any

Italy

Spain

Franc

e

Irelan

dUK

Belgium

Nethe

rland

s

Assets of the largest bank group to GDPAssets of 3 largest banking groups to GDP

38%

68%65% 64%

35%39%

36%33%

28%29%

25%

15%17%

26%

46%

82%

65%63%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Poland

Germ

any

UK

Franc

e

Spain

Irelan

dIta

ly

Nethe

rland

s

Belgium

Assets of the largest bank group to banking sector balance sheet totalAssets of 3 largest banking groups to banking sector balance sheet total

Banking sector size and concentrationin relation to country fiscal position

7Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010)

-1

Assets of 3 largest banks, deficit and debt (% of GDP)

USA

Spain

Ireland

UK

France

Germany

Poland

Italy

Belgium

Netherlands

0%

50%

100%

150%

200%

250%

300%

350%

400%

40 50 60 70 80 90 100 110 120

Public debt (2009, % GDP)

Assets of 3 largest banks

(% of GDP)

Banking sector size

Debt growth(2010 forecast)

USA

Netherlands

Belgium

Italy

Poland

Germany

France

UK

Ireland

Spain

0%

50%

100%

150%

200%

250%

300%

350%

400%

0 2 4 6 8 10 12 14 16

Government deficit (2009, % GDP)

Assets of 3 largest banks

(% of GDP)

Banking sector size

Deficit growth/fall

(2010 forecast)

Banking sector size and concentrationin relation to country fiscal position

8Sources: ECB, Banks Annual Reports (2009), „Credit Writedowns” (June 2010), „The Forbes Global 2000” ranking (2010)

Assets of the largest bank, deficit and debt (% of GDP)

USA

Netherlands

Belgium

Italy

Poland

Germany

France

UK

IrelandSpain

0%

50%

100%

150%

200%

250%

40 50 60 70 80 90 100 110 120

Public debt (2009, % GDP)

Assets of the largest bank (% of GDP)

Banking sector size

Debt growth(2010 forecast)

Netherlands

Belgium

Italy

Poland

Germany

France

UK

Ireland

Spain

USA

0%

50%

100%

150%

200%

250%

0 2 4 6 8 10 12 14 16

Government deficit (2009, % GDP)

Assets of the largest bank (% of GDP)

Banking sector size

Deficit growth/fall

(2010 forecast)

Main challenge

Conclusion

9

Existing regulations and undertaken initiatives

Domestic markets

Cross-border issues

Large financial institutions

Problems partially addressed

Additional activities required

Area not addressed

Problem particular serious in Europe

Problematic fiscal position and extremely limited scope for intervention in a distressed bank by individual country

Monetisation public debt :- can not be applied by individual country- unclear mandate for ECB- European Financial Stability Facility

Vast asymmetry between actual benefits from Large Financial Institutions and potential cost of resolution

Interventions in LFI carries the risk of sovereign debt default