BANK STRUCTURE

AND REGULATION IN
THE EU
 WE ARE…
GROUP 7

 Sabiha Farzana Moonmoon 16-089

 Tahmina Akhter 16-083
 Sushmita Saha 16-032
 Nandita Saha 16-060
 K. M. Wasiuzzaman 16-005
EUROPEAN UNION (EU)

 Economic and political union

 27 members states which are located primarily
in Europe
 EU traces its origin from the European Coal
and Steel Community (ECSC) and European
Economic community (ECC) formed by 6
countries in 1950
BANK STRUCTURE - GERMANY
GERMANY BANKING

 Home of universal bank and the hausbank

system.

 Hausbank System: Close relationships between

commercial concerns and banks with cross
shareholdings and shared directorship.
Grosbanken: National Bank
• 3 to 5
• Date back to 19th century
• Offer a full range of banking service
Regional Bank
• 200
• Have their headquarters & branches
centralized in a particular region
• Also have branches in major German
cities
LANDESBANKEN: GERMAN PUBLIC BANK

 Began as regional girobanks

 In 1900 clearing was their primary function

 By 20th century they offer banking services,

making them effectively universal banks
DEUTSCHE POST BANK: THE POST OFFICE

 Accepts savings from individuals and small

firms
 Savings are used to fund finance for local or
regional infrastructure
 Lend to clients who might be turned away by
other banks hence the guarantee extended to
them
MUTUAL CREDIT CO-OPERATIVE

 Under 1800
 Linked to particular professions and trades

 Provide basic banking services- accepting

deposits and making loans
 Hypothekenbanken: Privately owned mortgage
bank
 Bausparkassen: mutual building and loan
association

Both focus largely on arranging mortgages for home

ownership
SPARKASSEN: SAVINGS BANK

 Under 600
 Linked to local or regional government
BANKING SYSTEM OF GERMANY

 Central banking consists of the bundesbank

and nine regional landeszentralbanken

 Until the production of Euro, its remit was to

maintain price stability
PROPOSAL OF AMENDMENTS

 Pohl Commission propose to reduce the no of

Landeszentralbanken to five

 The Bundesbank proposed that BAKred to

subsumed under the reorganized Bundesbank
CHANGES MADE

 In march 2001, the financeminister called for

the creation of a new agency with responsibility
for the supervision of the entire financial sector
including banks
 Bundesbank continues to represent at the
European Central Bank
BAFIN

 A legal entity within the Ministry of Finance

 Began operations in May 2002

 Merges the function of the former offices for

bank supervision (Bakred) with the equivalent
organizations in insurance and securities
BAFIN

 Created a single body with responsibility for

supervising all firms in the financial sector,
including issues as diverse as consumer
 Created 2700 banks,700 insurance companies
and 800 other firms
 Employed about 1000 people with offices in
Bonn and Frankfurt
BANK STRUCTURE- FRANCE
SPANISH DEPOSITORY
INSTITUTIONS
•Mutual savings Banks
•Credit cooperatives

These institutions operated under a similar regulatory

regime.

There also have a SCIs which are confined to

granting credit to specific sectors
SPANISH BANKING SYSTEM

 Was liberalized in 1975-1980

 Market was geographically segmented

 Little competition among market segments

 Control on interest rates were relaxed in 1987

 Credit restriction were eliminated

 Commercial banks and mutual savings banks

are key players of spanish banking system
THE EFFECT OF REFORMING
 Creating an competitive environment.
 SDIs fought to attract deposits by offerings very
cheap products.
 Generated two types of institutions which
focused on growth.
 Wave of mergers and acquisitions both
commercial and savings banks.
 Credit institution depended on the
government's official credit institute.
THE EFFECT OF REFORMING
 Banking corporation of spain was created by
merging the official credit entities
 Argentaria was privatized between 1993 to
1998
 Commercial and mutual saving banks have
about respectively 49% and 46% of total
deposits
 Mutual savings banks increased their share of
the deposit market and their branch networks
MOVEMENT OF MAJOR SPANISH BANKS
 The major Spanish banks moved into
Spanish south America.
 Cultural and political link between two
regions.
 Reducing risks related to multinational
banking.
 Spain plays a leadership role in Hispano-
America.
 The Argentinean financial crisis affected the
big Spanish banks
A FINANCIAL LAW(2002)
 To modernize the Spanish financial system.
 To increase the efficiency and competitiveness
 To encourage the use of new channels of
distribution in banking.
 To authorize the creation of e-cash institutions.
 To conduct with greater protection of the
consumers using financial services.
 The central bank is responsible for bank
supervision.
STRUCTURE OF SCANDINAVIA

Norway

Denmark Scandinavia Sweden

Finland
BANK STRUCTURE OF SCANDINAVIA

 Four independent countries make up the region of Scandinavia

(Norway, Denmark, Sweden ,Finland)
 Recent mergers of banks across the region have increased the
degree of financial integration between the countries,
 This region is closer to achieving a single financial market than
the EU as whole.
 The area experienced quite a severe banking crisis in early
1990s.which led to a large number of mergers, giving this region
the most concentrated banking system.
 There was savings and “union” banks, but on a much smaller scale
and no regional banks.
OLDEST CENTRAL BANKS OF SCANDINAVIA

Bank name Established responsiblity

The bank of 1668 Controls the payment system and

Sweden ensures financial stability
prevails
Soumen pankki 1881 -
(The bank of
Finland)
Norges bank 1816 Controls the investments of the
( The bank of Government Petroleum Fund
Norway)
BANK STRUCTURE OF ITALY:
The Banca D,Italia, the central bank of Italy, was
founded as a private bank in 1897.
 Responsible for maintaining price stability from
1947
 It has great power for approving products offered
by banks
 It also discourages branch banking
 Because of frequent failures and crises before and during the 1930s, all
banks are closely supervised by government.

 In Italy , there was little demand for financing via equity as there industry
consists largely of family or state owned firms.

 Being pressured for reforming, by banking association and groups

representing firms and employees, The Banca D,italia responded by
relaxing restrictions it could and in 1990 began to encourage mergers and
branch networks.
THE BANKING ACT 1993:

 Abolished distinction between short and

medium term deposits and loans.
 Banks were allowed to hold up to 15% of
commercial concern.
 Subsidiaries of the BHCs can offered financial
services including insuraances.
 There was a steady stream of privatization
from 1993.
 Credito Italiano
 Banca Commerciale Italiana

 Mediobanca

In the late 1990s:

 Banca Nationale del Lavoro

 Banco di Napoli

 Banca di Roma

All of the Banks sale their 64% of the ordinary

shares.
 By 1999, the share of the banking sector held
or supervised by the state had fallen to 12%
from 70% in1993.
In 2000
 79 banks groups with 267 banks(controlling
90% country asset)
 There are 8 maggiori(very large banks) and 16
grandi(large) banks.
IN 2000 THERE WERE:

 284 limited banks with over 20000 branches

 44 cooperative banks with nearly 5000

branches

 499 mutuals with just under 3000 branches

DIRECTIVES FOR A SINGLE EU FINANCIAL
SERVICES MARKET:

The Single European Act (1986) was

considered essential if EU markets, including
the banking and financial markets, were to
become sufficiently well integrated to be called
“single” markets.
 The 1’st of January 1993 was designated
‘‘single market day’’.
 The objective of the section is to address the
issue of achieving a single banking market in
the European Union.

 It was hoped the act would speed up the

integration of European markets through the
introduction of qualified majority voting and
the replacement of harmonisation with
mutual recognition.
THE INTERNAL MARKET: BACKGROUND

The Treaty of Rome(1957)

•Objectives was to bring about the free trade
throughout EU
•Achieved harmonization of rules and regulation

The single European act (1986)

•To speed up the integration of markets

•Mutual recognition replaced the goal of

harmonization
THE EUROPEAN DIRECTIVES

 The First banking directives(1977)

Credit institution as any firm making loan and
accepting deposits

 The second banking directives(1989)

The key EU banking law
FINANCIAL SERVICE COVERED BY THE
DIRECTIVES

 Deposit taking
 Lending, forfaiting and factory

 Money transmission

 Financial leasing

 Credit reference services

 Custody services
PROBLEM PRIOR TO THE SECOND DIRECTIVE

 Entry of banks into other member states was

hampered
Provided solution
 Removes these constraints and specify that the
home country is responsible for the bank’s
solvency
 Imposes a minimum capital of 5 million Euros
on all credit institution
OTHER EUROPEAN DIRECTIVES

 Own funds and Solvency ratio directives(1989)

 Money laundering directives(1991)
 Consolidated Supervision directives(1983 to 1993)
 Deposit Guarantee directives(1994)
 Credit institution winding Up directives
 Large exposures directives(1992)
 The consolidated supervision directives
 Capital adequacy directives(1993,1997,2006)
 THREE OTHER DERIVATIVES

 Insurance directive for life and non life

insurance:
1. Passed since 1973
2. Third life directive and third non-life directives were
passed in 1992
3. Create an EU passport for insurance firms

 Financial conglomerate directive:

1. The directive bans the use of the same capital twice in
different parts of the group
 Market abuse directive:

1. Introduce a single set of rules on market

manipulation and insider dealing

2. This directive emphasizes on –

a. Investor protection
b. Greater transparency
c. Improved information flows
d. Closer coordination between national authorities
ACHIEVING A SINGLE MARKET IN FINANCIAL
SERVICES
 a single financial market is considered as an
important EU objective

 The original objective was to achieve a single market

by the beginning of 1993

 But integration of EU markets(retail banking/finance

sector) is a long way from completion
THANK YOU