FROM THE EUROPEAN BANKING FEDERATION:
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CONSULTATION RESPONSE
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ECB consultation on banking sector consolidation: EBF response
BRUSSELS, 2 October 2020 – The EBF fully supports the intention of the ECB to achieve clarification and transparency on its supervisory approach to notifications of proposed acquisitions and applications for permission for a business combination. As the ECB rightfully indicates, decisions for consolidation belong to market participants. Nevertheless, the ensuing supervisory examination is a crucial step in the success of such transactions. The publication of an ECB guide should add clarity to the process. However, it will be important for the ECB to not just clarify the process, but we strongly encourage the ECB to actively facilitate mergers.
In addition, we would like to emphasize the following key points of the EBF response:
- The EBF supports the ECB in coordinating with other authorities during the process of a banking merger. As an example, the EBF encourages to coordinate with the Single Resolution Board to establish transitional arrangements of the minimum requirement for own funds and eligible liabilities (MREL) and total loss-absorbing capacity (TLAC), which take into account the merits of consolidation for the combined entity.
- The challenges that are currently being faced by banks are more structural and need to be addressed through changes in regulation. We need to reduce regulatory barriers, which will requires a broader approach to the topic, which will need action from lawmakers. Those include, but are not limited to:
- more harmonization in anti-money laundering (AML) and tax regimes is needed
- addressing problems arising from regulation that goes beyond global standards, such as the regulatory treatment of external MREL
- Removal of obstacles to the free flow of capital and liquidity
For more information:
Gonzalo Gasos, Senior Director, Prudential Policy and Supervision
+32 2 508 37 11, g.gasos@ebf.eu
About the European Banking Federation:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.
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As European decision makers are discussing the way forward on TLAC implementation and the expected MREL review in Europe, the European Banking Federation would like to provide the following key principles and comments to facilitate the evolving thinking on TLAC and MREL implementation in Europe:
Key messages:
The implementation of loss absorbency and recapitalisation requirements in the EU should:
- ensure legal certainty and provide all market participants with a stable, predictable and transparent methodology for setting loss absorbing capacity requirements sufficient to ensure the continuity of critical functions provided by banks, without recourse to public solvency support.
- be consistent with the globally agreed TLAC term sheet and fully avail itself of the therein embedded different options for debt subordination that best meet European specificities and business and funding models. Any departure from the TLAC Term Sheet needs to be tested in an impact assessment to ensure the benefits outweigh the costs and that the framework is consistent with the Commission’s jobs and growth agenda.
- be consistent with the resolution strategy of individual banks and striking the right balance between avoiding market fragmentation and ensuring a level playing field.
- ensure conceptual and technical consistency with the existing legal framework, notably the CRR and BRRD, and retain the legal framework as simple as possible
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post EBF comments on EU TLAC implementation and MREL review appeared first on EBF.
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