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PRESS RELEASE

Memorandum of Understanding on high-level principles of co-operation between the banking supervisors and central banks of the European Union in crisis management situations

10 March 2003
  1. The banking supervisory authorities and the central banks of the European Union (EU) have agreed on a Memorandum of Understanding (hereafter referred to as "the MoU") on high-level principles of co-operation in crisis management situations. The authorities that have endorsed the MoU are listed in the Annex to this Press Release. The banking supervisory authorities and central banks of acceding countries will be invited to become parties to the MoU once these countries have joined the EU. The MoU has entered into effect on 1 March 2003.
  2. The co-operation envisaged in the MoU is aimed at pursuing the common objective of banking supervisors and central banks of ensuring the stability of the financial system. The progress made in the integration of financial markets and market infrastructures in the EU, the growing number of large and complex financial institutions and the diversification of financial activities have increased the liquidity and efficiency of the relevant markets. At the same time, such developments may also increase the likelihood of systemic disturbances affecting more than one Member State, and possibly increase the scope for cross-border contagion. In this context, the MoU aims to enhance the practical arrangements for handling crises at the EU level, since smooth interaction between supervisory and central banking functions will facilitate an early assessment of the systemic scope of a crisis and contribute to effective crisis management. The MoU also represents a contribution by banking supervisors and central banks towards meeting the recommendations made by the Economic and Financial Committee in its Report on financial crisis management [[1]], as endorsed by the ECOFIN Council. In order to follow up on the recommendations of this report, the Banking Supervision Committee of the European System of Central Banks worked on the definition of co-operation principles and procedures, and these have now been formalised in the MoU.
  3. The MoU, which is not a public document, consists of a set of principles and procedures for cross-border co-operation between banking supervisors and central banks in crisis situations. These principles and procedures deal specifically with the identification of the authorities responsible for crisis management, the required flows of information between all the involved authorities and the practical conditions for sharing information at the cross-border level. The MoU also provides for the setting-up of a logistical infrastructure to support the enhanced cross-border co-operation between authorities. The framework defined in the MoU will apply in crisis situations with a possible cross-border impact involving individual credit institutions or banking groups, or relating to disturbances in money and financial markets and/or market infrastructures (including payments infrastructures) with potential common implications for Member States. Co-operation will take the form required by the specific features of the crisis and with regard to all the relevant supervisory and central banking tasks and functions, and will be consistent with the necessary flexibility of action of each of the authorities involved.
  4. Crisis management procedures will in practice involve a wider range of authorities and respective functions than those within the scope of this MoU. They include Ministries of Finance and deposit insurance funds, securities and insurance supervisors in the case of crises involving these financial sectors, as well as third-country authorities in the case of crises originating or having an impact outside the EU. The MoU can therefore be regarded as a contribution to other co-operation arrangements that might be implemented or may be developed in the future involving other relevant authorities.

ANNEX - Parties to the Memorandum of Understanding

Commission bancaire et financière/Commissie voor het Bank- en Financiewezen, Belgium Nationale Bank van België/Banque Nationale de Belgique Danmarks Nationalbank Finanstilsynet, Denmark Bundesanstalt für Finanzdienstleistungsaufsicht, Germany Deutsche Bundesbank Bank of Greece Banco de España Banque de France Commission Bancaire, France Central Bank of Ireland Banca d'Italia Banque centrale du Luxembourg Commission de Surveillance du Secteur Financier, Luxembourg De Nederlandsche Bank Finanzmarktaufsicht, Austria Oesterreichische Nationalbank Banco de Portugal Rahoitustarkastus, Finland Suomen Pankki Finansinspektionen, Sweden Sveriges Riksbank Bank of England Financial Services Authority, United Kingdom European Central Bank

  1. [1] Economic Paper No. 156, European Commission, July 2001, (available at http://www.europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers156_en.htm)

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