EU Science Hub

Financial markets regulation

The JRC provides statistical analyses, computation tools, and modelling support to the Commission services in charge of financial markets regulation, taxation, and competition policies.

The JRC competences on statistics, econometrics, and financial markets modelling have been deployed by the Commission especially for improving prudential regulation for banks and insurances and for tackling systemic financial risk.

The SYstemic Model of Banking Originated Losses, SYMBOL, was developed by the JRC, in cooperation with the Directorate-General Internal Market and Services and academics, to assess the impact of EC legislative proposals in the field of banking regulation.

SYMBOL simulates potential crises in the banking sector under various assumptions, and allows assessing the cumulative effects of different regulatory measures (e.g. higher capital requirements, strengthened deposit insurance, and introduction of resolution funds) and their most effective combinations.

SYMBOL has been used to contribute to the Impact Assessments of: the Directive on Deposit Guarantee Schemes (2010), to enhance the protection of the savings of the European citizens; the EC Legislative package on Capital Requirements (CRD4, CRR4, 2011) to strengthen banks capital requirements in line with Basel III international standards; the proposal for a new EU framework for Crisis Management and Bank Resolution (2012), to orderly resolve banks in distress and preserve market stability and the proposal for a Single Resolution Mechanism (2013) to regulate and supervise the financial sector in a more integrated market, and to break the vicious circle between banks and their sovereigns via the banking union.

Moreover SYMBOL has been used by to investigate the impact of banking crises on public finance in studies dedicated to sustainability of public finances: starting from the 2011 Commission annual report on public finances in the economic and monetary union (EMU); regularly updating the results in the latest Sustainability Monitor Reports (e.g. 2016 and 2017 editions), which investigate the ability of Governments to finance their current debts and expected expenditures.

SYMBOL is currently being used for contributing to the work on: the proposal the establishment of a European Deposit Insurance Scheme, which is the third pillar of the Banking Union.

SYMBOL has also been deployed in support of the proposal for Banking Structural Reform, aimed at creating a more responsible financial system which works for real the economy and society as a whole, curtailing activities of purely speculative nature, and, thereby reducing the risks for EU taxpayers; and the proposal to amend some rules of the capital requirements Directive and Regulation.

The JRC is also providing scientific support to the Commission on Fintech and Sustainable and Green Finance, as well as conducting research on modelling the links between sovereigns and banks, contagion channels spreading risks in the financial sectors, and on assessing how taxation policies may affect banking sector risks.

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