The nature of the operations involved makes banking one of the key sectors of a country's economy, as much of the savings, investment and finance are channeled through it. That is why banks are subject to special scrutiny, which is known as banking regulation and supervision. The regulators and supervisors are therefore important stakeholders in the financial industry in general and BBVA in particular.
Public regulation aims to ensure that financial institutions operate correctly, strengthen their resilience to adverse events and harmonize the interests of all the parties directly affected (such as banks, savers and investors) with the general interest.
Over the last few years, a number of European authorities such as the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), the European Commission, etc. and also global authorities such as the Financial Stability Board (FSB), Basel, etc. have developed a regulatory framework to improve the strength of the financial system and thus reduce the virulence and also the probability of future financial crises.
Given the importance of the new regulatory agenda, BBVA has maintained a constant dialog with the different regulators to adapt to this new reality under the best conditions.
Parallel to this regulation, over the last few years changes have also taken place in the supervisory environment, especially in the Eurozone. In June 2012 the heads of state and government of the European Union promoted the creation of a single banking supervisor with the aim of improving the quality of supervision in the Eurozone, boosting market integration and breaking the negative vicious circle that had been created between the lack of confidence in banking institutions and the doubts about the sustainability of public debt. Thus, the launch of the Single Supervisory Mechanism (SSM) on November 4, 2014 has been one of the fundamental milestones in banking union. Thanks to the SSM, all the financial institutions in the Eurozone of a certain size will be supervised under the same regulatory and methodological framework, regardless of their geographic location. The appearance of this new mechanism, which is now in fact the supervisor with the greatest volume of assets under its responsibility, requires banks to adapt to the new environment.
In the case of BBVA it was decided to strengthen the relationship with this supervisor with the creation of the Global Supervisory Relations unit, which is responsible for coordinating relations with the SSM and other supervisors, such as the Single Resolution Mechanism (SRM), and to facilitate relations with local supervisors. SSM supervision takes place through mixed groups made up of Bank of Spain teams located in Madrid and ECB teams located in Frankfurt, together named Joint Supervisory Teams (JST). For this reason, BBVA has decided to open an office in Frankfurt to facilitate dialog with the ECB teams.
Great importance of regulators and supervisors for BBVA Group, with whom it maintains constant dialog
In 2015 supervisory activity has been very strong and intrusive, with a daily attention and with the direct involvement of the Bank's senior management.
In conclusion, for BBVA constant dialog with the supervisor and regulator has become a fundamental task for adapting to this new environment, characterized by greater regulatory pressure and a stronger and more intrusive supervisory culture. Only this way BBVA can guarantee a correct response to the supervisors' new regulatory requirements and demands.