EBF Response to EC’s Targeted Consultation assessing the adequacy of macroprudential policies for NBFI
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Publication date: 21 November 2024
General Comments:
The European Banking Federation emphasizes the importance of tailoring regulatory approaches to the heterogeneous nature of Non-Bank Financial Intermediaries (NBFIs). Any new measures must avoid overly prescriptive, “one size fits all” frameworks that risk undermining market functionality and innovation. To enhance the oversight of NBFIs, the EBF advocates for improved data sharing and cooperation among regulatory authorities. Addressing systemic risks requires focusing on unregulated entities rather than imposing additional burdens on banks, which could inadvertently increase vulnerabilities by pushing activities toward less regulated sectors.
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]]>LETTER
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EBIC calls for the postponement of the Basel III implementation date in the EU
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BRUSSELS, 31 October 2023 – On 20 October, the European Banking Industry Committee (EBIC) submitted a joint letter to the co-legislators asking for a postponement of the Basel III implementation date in the European Union. EBIC strongly supports the ongoing legislative process aiming at finalizing the Banking Package. Given the substantial and comprehensive nature of the forthcoming legislative changes brought about by CRR III, a minimum of 18 months between the publication of CRR III rules in the Official Journal of the EU and the effective implementation date of the new rules will be necessary. Assuming CRR III publication in the Official Journal by end of 2023, EBIC suggests an initial application no earlier than 1 July 2025. Any postponement in the publication would require a further commensurate shift in the CRR III application.
- CRR III mandates the European Banking Authority (EBA) to undertake tasks related to over 70 Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) (altogether the EBA has 127 mandates) which must be factored into banks’ implementation of CRR III. A number of the EBA standards and guidelines are of high importance and mandatory for banks’ CRR III implementation to succeed and for banks to start reporting under the new rules as of the first application date.
- Besides the fact that EU institutions/supervisors need time to perform their legally established mandates, EU banks need a reasonable amount of time to transition to new regulations, allowing them to upgrade their systems and adapt to the new calculation and reporting requirements in a controlled manner.
- There is also an issue of practical alignment between the supervisory reporting and the capital requirements – as the two cannot be decoupled and the banks cannot implement the requirements without the reporting, which takes time to set up.
Finally, a postponement would reflect the process in other Basel jurisdictions, such as the USA or the UK. Even if the Basel III framework may not be fully applied to all institutions in these countries, the postponement of the first application date has already been announced there.
About the EBF:
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.
Media contact:
Vittoria Barbieri, Communications Officer, v.barbieri@ebf.eu
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]]>PRESS RELEASE
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Basel III agreement to further strengthen resilience of European banking sector, while maintaining its ability to finance growth
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BRUSSELS, 29 June 2023 – The EBF notes the agreement reached by the Swedish Presidency of the EU with the European Parliament and the European Commission on the Banking Package, a core legislative piece that will transpose into EU law the Finalisation of Basel III as well as other prudential topics.
“We are on track with the implementation of Basel III in Europe. The European banking system has stood firm in the face of bank crises in other countries this year, thanks to the significant level of resilience achieved during the regulatory reform. The agreement on the Banking Package implies a significant capital increase for European banks — it is important that other jurisdictions, notably the US, follow suit soon,” said EBF CEO Wim Mijs.
Today’s agreement retains the application of the output floor at a local level which will further increase the capital requirement for banking groups with cross-border subsidiaries, way beyond the consolidated level option offered by Basel III. The EBF is hopeful that it can be revisited in 2028 for a more integrated and efficient banking system.
Europe currently has the highest capital ratio across all global regions. We have to secure the competitiveness of the banking system for economic growth in Europe. It is also important to note that the Basel standards are applied across all banks in Europe, which has proven instrumental in avoiding contagion from the recent bank crises in other regions.
Beyond the Basel III reforms, the package does not outline an improved prudential treatment of securitisation. While a partial and transitory relief to securitisation is a step in the right direction, a broader approach is necessary to unlock the lending potential of European banks.
The Banking Package will deliver a significant number of technical mandates to the European Banking Authority (EBA) many of which will have a relevant effect on banks. Priority should be given to reporting guidelines, calculations, and certain regulatory fixes. It will be essential to plan the implementation to ensure sufficient preparatory time for the banking sector to ensure IT processes and controls are adapted accordingly.
With this agreement, Europe stays the course of Basel III implementation at the committed timeline of 1st of January 2025.
About the EBF:
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.
Media contact:
Rūta Barthet, Senior Media and Communications Officer, r.barthet@ebf.eu
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]]>LEGAL OPINION
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Legal opinion on the compliance of the parallel stacks approach with Basel Accord
BRUSSELS, 23 June 2021 – A legal opinion by a European Network of leading continental law firms found that the so-called parallel stacks approach – applying the output floor to the Basel Minimum Requirements and implementing the result as an additional, stand-alone capital requirement – is compliant with Basel Accord. The study, commissioned by the European Banking Federation (EBF), was undertaken by Chiomenti, Cuatrecasas, Gide Loyrette Nouel and Gleiss Lutz law firms.
The EBF has identified a number of concrete options to make the implementation of Basel IV more suited to the European specificities, including the possibility to implement the output floor as a separate capital requirement where only internationally agreed capital buffers are applied (the so-called parallel stack approach), solutions to avoid penalising unrated corporates which form the vast majority of companies in Europe, a cap to the operational risk requirement in line with other jurisdictions, as well as maintaining the options already enacted in European legislation (CVA, SME supporting factor, etc.). All these elements are key to ensure the proper implementation of the Basel Framework in Europe.
The legal study findings confirm that the parallel stacks approach can be used by the EU as transposition of the Accord. This approach would respect the mandate received from the Council and the Parliament. This would be in line with the direction to avoid a significant increase of overall capital requirements, put forward by the G20. The alternative of calculating and applying the output floor to the Additional European Requirements would go beyond the conditions outlined in the Basel III framework. This would constitute an unwarranted, disproportionate ‘gold-plating’ exercise, whereby powers of an EU directive are extended when being transposed into the national laws of a member state.
In light of the upcoming EU implementation of the reform and the potential impact of the COVID-19 crisis, Copenhagen Economics has published a report assessing the impact of the reform on the EU banking sector and the real economy. Among other things, the research commissioned by EBF found that the reform could increase the capital need of European banks by between EUR 170-230 bn. The impact on bank customers as an annual increase in costs associated with lending is estimated at EUR 25-30 bn.
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FOR MORE INFORMATION:
Ruta Barthet, Senior Media and Communications Officer, r.barthet@ebf.eux
Gonzalo Gasos, Senior Director of Prudential Policy & Supervision, g.gasos@ebf.eu
ABOUT THE EBF:
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. Website: www.ebf.eu
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Speech by EBF Head of Banking Supervision Gonzalo Gasosz
Ljubljana, 29 May 2019
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AS PREPARED FOR DELIVERY
EBF Head of Banking Supervision Gonzalo Gasos with Slovenian winners of the 2019 European Money Quiz finals
Thank you, Stanislava Zadravec Caprirolo, for your invitation to participate in the Banking Conference of the Bank Association of Slovenia. I am pleased to visit Slovenia, also because it is a country with a keen interest in finance. That became obvious in the European Money Quiz, the financial literacy competition that we organise annually in the European Banking Federation with the participation of more than one hundred thousand students from across the EU. Two teenagers from the Slovenian team were placed first in the second edition last month. My deepest congratulations!
The last time I was in Ljubljana was in 2010 when I gave a presentation in the program on home-host cooperation. Rereading my slides, I realise how much the supervisory architecture has changed towards a European model and how little the banking system has moved from its national based model since then. In 2010, the first steps of the European System of Financial Supervisors were being taken. I claimed in my presentation that further bank consolidation would contribute to the Single Market’s integration and that we all should encourage the emergence of cross-border banking groups.
– This will be the first topic of my speech, the longstanding cross-border ambition in European banking and supervision;
– Secondly, I will raise some facts about the supervision of banks as businesses in the new regulatory framework;
– Number three, I would like to assess the interaction between regulation and supervision;
– Finally, I will refer to the role of the internal assessment of banks as the place where business and supervision come together, offering an opportunity to conduct business-conscious oversight in the post-regulatory reform era.
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]]>European banks call for appropriately finalising the regulatory framework to support efficiently economic growth and job creation
MALTA, 5 May 2017 — European banks, through the Board of the European Banking Federation, today reaffirmed their commitment to supporting the European project through actively and responsibly financing businesses and households. The Board welcomed continued evidence of easing bank credit standards and increasing loan activity in the euro area, as demonstrated again in the first quarter by the quarterly Bank Lending Survey of the European Central Bank.
Given the particular significance of bank finance for Europe’s economy the EBF Board called on national and European policymakers for proper calibration when it comes to the finalisation of the wide range of regulatory measures still currently under discussion in the European Union. This is necessary so that banks can continue their financing commitment and support growth and jobs.
Says Frédéric Oudéa, President, EBF Board:
“We need to make sure that the international competitiveness of the European banking sector is not damaged. It is up to policymakers now to finalise the regulatory agenda and strike the right balance, avoiding undue impact on the financing of households and companies while ensuring the development of a safe, sustainable and competitive European financial services industry that benefits all our economies.”
Future of electronic payments in Europe
Customers expect banks to protect their personal data. Data protection is at the core of trust in financial institutions. While European banks fully embrace innovation in their services and value competition in the market, the Board of the EBF warns that an inappropriate changes of proposed technical standards for electronic payments would put at risk the integrity of customer data, jeopardises the level playing field in European payment services and places a disproportionate burden on banks in the implementation of unnecessary technical solutions.
The Board calls on the European Commission to adopt – without amendments – the delegated act proposed by the European Banking Authority (EBA) for electronic payment services under the second European Payment Services Directive, known as PSD2. Deviating from the EBA recommendations would clearly go against the objectives of enhancing consumer protection and improving security of payment services across the European Union.
Regulatory uncertainty
Through the Board of the EBF European banks reaffirm their commitment to serving Europe’s economy and to working with households and businesses – including SMEs – on their finances.
National and European policymakers need to recognise that banks are held back from fully delivering on this commitment as long as they continue to face regulatory uncertainty.
Particular sources of concern for banks are the leverage ratio; the implementation of the minimum requirement for own funds and eligible liabilities (MREL); the Net Stable Funding Ratio (NSFR); and the Fundamental Review of the Trading Book (FRTB). Financing of the European economy can be substantially impacted if these are not carefully and proportionally calibrated.
EU Risk Reduction Package
The Board calls on EU policymakers to agree the EU Risk Reduction Package in a way that respects the balance between economic growth and financial regulation. European banks generally see the package as an opportunity to make regulation more proportionate, less burdensome and more manageable.
However certain elements of the package, in particular those regarding capital requirements, overlap with measures currently under discussion at the Basel Committee on Banking Supervision. The Board calls on policymakers to put on hold EU decisions on these measures until international decisions on the Basel IV framework have been finalised.
Basel IV
Addressing the global discussions in the Basel Committee, the Board of the EBF continues to fear that Basel IV could have significant negative consequences for bank financing in Europe if it is adopted with ill-calibrated parameters, in particular an output floor. The EBF Board strongly believes that European policymakers should only support an agreement on international standard if it is not detrimental to the banks’ capacity to finance businesses and households and hence does not jeopardise European growth perspectives.
Furthermore the Board calls on European policymakers to fully take into account the specificities of EU bank finance as opposed to the structure of financing in the United States, particularly regarding mortgages and corporates.
Resolution
While the Board recognised the significant progress being made by the Single Resolution Mechanism (SRM) it noted the implementation of the full range of measures included in the SRM requires careful assessment of the potential impact and unintended effects on the EU economy. The Board highlighted the importance of building a constructive dialogue between the industry and the Single Resolution Board at a critical moment in its development.
Long-term topics
Beyond the most urgent topics on the regulatory agenda, the Board also discussed longer-term topics such as the upcoming negotiations between the EU and the United Kingdom on its EU membership and the pending discussions on future cooperation between the EU27 countries and the UK. With regards to the EU plans for creating a Capital Markets Union, the Board unanimously agrees that the European Commission needs to develop a more ambitious approach, capital market financing being needed going forward to finance the economy as a complement to bank financing.
Malta conference on key issues affecting smaller European banks
While in Malta the European Banking Federation and the Malta Bankers’ Association organised a joint conference on key issues affecting smaller European banks.
Hosted at the Malta Financial Services Authority the conference addressed the need for proportionality in regulation; digitalisation; and unintended constraints to correspondent banking, with the participation of the European Banking Authority, the European Commission and the European Central Bank. Prof. Edward Scicluna, Finance Minister of Malta, which currently holds the presidency of the EU, closed the conference with a reflection on the need to fine-tune EU regulation for banks.
Media contact:
Raymond Frenken, Head of Communications, +32 496 52 59 47, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 4,500 banks – large and small, wholesale and retail, local and international – employing about 2.1 million people. EBF members represent banks that make available loans to the European economy in excess of €20 trillion and that securely handle more than 300 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
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]]>EBF PRESS RELEASE – EBF calls for rigorous impact assessment of Basel III
- Banks generally welcome agreement on final shape of framework
- EBF asks EU to adopt Basel III without harming nascent recovery
- Banks underline need for harmonised global implementation
BRUSSELS, 7 December 2017 – The European Banking Federation notes that the Basel Committee on Banking Supervision and its Group of Central Bank Governors and Heads of Supervision have reached an agreement on the completion of the Basel III international regulatory framework for banks.
The EBF generally welcomes the agreement on the final shape of the Basel framework. Banks, their investors and financial analysts now can carefully analyse the finalised framework so that they can plan with certainty for the new end-state capital requirements.
The European banking sector is firmly committed to financing growth and prosperity in Europe. The EBF now notes that the Basel Committee has adopted measures that may unbalance risk sensitivities and that could threaten financing in the European economy by penalising low-risk exposures, particularly residential mortgages. These can be adversely affected by the Basel Committee’s decision to introduce an output floor.
In our view, there is a clear risk that the costs of the measures for the EU economy as a whole will outweigh the benefits. Therefore, the EBF now calls for a rigorous assessment of the impact on the banking sector and the economy. Before any decision is made on incorporating the newly finalised Basel III framework in EU regulation, the impact of these measures, particularly the output floor, needs to be determined.
Says Wim Mijs, Chief Executive Officer of the EBF:
“This agreement marks the end of the wave of global regulations stemming from the 2007 financial crisis. That is very good news. However we should not lose sight of the fact that the output floor may do significant harm to our European economy and to the global competitiveness of European banks. The output floor could impair the benefits of the finalised Basel III package and endanger the balance, so it is important that all parts of the world introduce the new requirements in a harmonised way.”
The situation of the European banking system and the economic conditions have significantly changed since the Basel Committee launched the “Finalisation of Basel III” programme in 2014. The most recent data from the European Banking Authority shows that European banks have continued increasing their loss-absorbent capital.
The ratio of highest quality capital, fully-loaded Core Equity Tier-1 (CET1), has increased from 11.5% in December 2014 to 14.0% as of June 2017. Similarly, the fully-loaded Tier-1 Leverage ratio stands at 5.1% for the EU banking sector as a whole. Liquidity ratios have also improved across EU banks, showing that the problems that Basel III was meant to tackle have been to a large extent overcome in the EU.
Media contact:
Raymond Frenken, Head of Communications, +32 2 508 3732, r.frenken@ebf.eu
About the EBF:
The European Banking Federation is the voice of the European banking sector, uniting 32 national banking associations in Europe that together represent some 3,500 banks – large and small, wholesale and retail, local and international – employing approximately two million people. EBF members represent banks that make available loans to the European economy of more than €20 trillion and that securely handle more than 400 million payment transactions per day. Launched in 1960, the EBF is committed to creating a single market for financial services in the European Union and to supporting policies that foster economic growth.
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]]>Publication date: 12 April 2018
The European Banking Federation fully supports the European Commission’s intention to consult with stakeholders about the potential impact of the finalisation of Basel III and on the implementation challenges involved.
The Commission’s clarity about the order of the legislative packages adds transparency to the process and is appreciated by the industry. It is reassuring that any legislative proposal to implement the outstanding Basel III reforms would be independent from the Risk Reduction Measures package currently under negotiation by the European Parliament and the Council. We would like to avail of this opportunity to remind the Commission that the Fundamental Review of the Trading Book (FRTB) has been placed in the same timeline as the finalisation of Basel III, therefore, it should be aligned accordingly.
Nevertheless, we have been surprised about the extremely short timeline for consultation. As stated in the EBF letter to Vice-President Dombrovskis, sent on 19 March 2018, these proposals will have long term effects on the EU banking system and the EU economy. They would therefore deserve a normal period for consultation ranging from two to three months. Interested parties should be given sufficient time to conduct analyses from their respective viewpoints if the Commission aims at receiving well-informed assessments. In particular, the Commission requests evidence on the potential impacts of those reforms on the EU banking sector and the wider economy. This cannot possibly be done in a few days.
In view of this situation, the present response of the EBF on behalf of the European banking industry, cannot be considered as comprehensive. It merely indicates a non-exhaustive list of areas that would deserve further analysis before a legislative proposal is devised. Given the above-mentioned insufficient time for proper consultation, the EBF may probably raise further relevant issues or develop more in-depth the matters presented in this document. We look forward to a long and deep engagement on this dossier.
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]]>EBF adviser: Daniel Bouzas
Publication date: 19 March 2019
Key points :
Financial markets are global, market actors are competing on a global level. Regulation should therefore be coordinated globally as far as possible. The financial regulatory reforms introduced in recent years have done much to enhance the stability of the financial markets and market participants. The more stringent capital and liquidity requirements, in particular, are sensible safety nets in a complex environment. It remains reasonable that the G20 and the FSB continue with this coordination. However, we warn against overtightening the regulatory screws at this juncture by introducing further requirements and call for a thorough review of existing regulation.
With regards to content, we would like to note our core findings and remarks, that we understand merit the utmost attention so to ensure a smooth review of regulatory impact and shape the fine-tunings to come.
• SMEs are the main components of the corporate landscape in Europe. Bank loans are the most important and demanded form of SME financing in Europe. The financing mix of SMEs in the EU differs quite substantially from other jurisdictions around the globe and entails varied specificities.
• The impact of regulatory measures in such an SME-filled environment need to be carefully calibrated as to avoid unintended consequences. Regulatory measures taken at European level can be strongly felt. Continued regulatory support to bank financing of the economy is critical to ensure proper financial intermediation and risk management.
• The new regulatory reform might put SME exposures at a disadvantage with regard to other alternative uses of capital in the banking sector. This might be an unintended consequence of the vast regulatory overhaul that has put the banking sector worldwide on a much stronger footing overall (higher need for collateral, long-term loans becoming more difficult etc.).
• These negatives effects have not yet really been perceptible (even if some hints are sprouting). This comes attached to the improvement of the economic situation in recent years/after the crisis, fostered by the unconventional monetary policy by the ECB (phase of zero interest rates), and its asset-purchase programme. However, the Basel III package has not yet been in place over a complete business cycle. In addition to that, modern economies are undergoing structural change and have a strong need for innovation and its financing. The capital requirements need to take into account that the economy need banks that are able to fulfil these financing needs. In addition, SME-focused policies at EU level, in the shape of direct public support or additional regulations on alternative financing methods have occupied the place of banks. However, direct capital market access is unlikely to be able to replace the financing of [average] SMEs. Direct market access is usually a possibility for larger corporates only.
• Policies affecting banks more concretely, have taken very specific shapes at European level, which we reflect on our analysis below: tackling the impact of Basel III and the its finalisation (Basel IV), securitisation, the SME Supporting Factor, the critical issue of NPLs in Europe and changes in its management due to regulation, IFRS 9 and the heightened regulatory scrutiny.
• Regarding other reforms impacting SMEs, as mentioned above, we mention the focus on European topics (in connection with the Capital Markets Union project), dealing with the European SME definition, SME growth markets, regulation of crowdfunding, among others. Specific substitution effects on specific business lines and also with respect to public finance and the different financing mix in innovative companies / new entrepreneurs.
• Finally, we shortly highlight positive voluntary initiatives from the banking to improve the information possibilities of SMEs and their ability to reach the financing they need.
We look forward to discussing these issues more in depth and engaging with you in the more focused consultation to be launched in June to develop more arguments and clarifications.
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]]>FROM BOARD OF THE EUROPEAN BANKING FEDERATION:
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Banks call for improving Europe’s global economic competitiveness in upcoming EU policy cycle
- EBF Board reiterates commitment to sustainably and responsibly financing businesses and households
- Achieving stable, efficient regulatory framework for financial services should be a priority under EU agenda 2019-2024
- Inappropriate transposition of Basel IV capital requirements would put at risk the capacity of banks to provide financing
BUCHAREST, Romania, 10 May 2019 — European banks, represented by the Board of the European Banking Federation, today urged the European Union to step up its efforts for improving Europe’s global competitiveness as part of the agenda of the next European Commission. Specifically, the EBF Board called on governments in Europe to recognize the key economic role of banks in funding growth and supporting prosperity.
Looking ahead to the upcoming policy cycle in the European Union, the Board reaffirmed the European banking sector’s constructive commitment to sustainably and responsibly financing businesses and households. Specifically, banks recognize their role in society when it comes to developing sustainable finance and supporting the energy transition together with other industries in order to meet international climate change objectives.
Banks are fully committed to supporting further European integration, specifically in the EU financial services markets through the completion of the Banking Union and the creation of an effective Capital Markets Union (CMU). This is particularly important at a time of increasing political and regulatory global fragmentation, in order to ensure that sufficient financing will remain available for the European economy.
Members of the Board also emphasized the sector’s unabated commitment to supporting the fight against financial crime and against money laundering and called on EU policymakers and national governments to move towards a more efficient and coherent framework for Anti-Money Laundering. The banking industry is keen to establish more effective cooperation with public authorities when it comes to dealing with financial crime and tax evasion.
As the start of the 2019-2024 EU policy cycle draws closer the EBF Board also underlined the need for the European Commission to thoroughly analyse the impact of the financial regulation that has been introduced in recent years and to properly determine any unintended consequences. A comprehensive impact analysis is necessary to ensure concrete and proportionate future proposals that will prevent further fragmentation of global markets and regulation, a G20 goal supported by the EU.
Members of the EBF Board acknowledged the importance of further pursuing the digital transformation in the banking sector, in order to provide clients – businesses as well as households – with innovative and secure financial services.
Looking ahead, the Board wants to draw attention to the potential adverse effects of Basel IV on the European economy. Implementing the additional Basel IV measures would mean a further significant increase in capital requirements for European banks of possibly more than 20 percent. This could lead to a severe reduction in the funding available for the economy.
Says Frédéric Oudéa, President of the EBF:
“Significant progress has been achieved in recent years, but there still are many challenges ahead. Governments and policymakers should ensure that banks can operate under the right conditions to sustainably and responsibly finance businesses and households. Ineffective and excessively burdensome regulation clearly has a negative impact on the European economy. An inappropriate transposition of Basel IV for example would undermine the EU’s capacity to finance its economy at a time of increasing fragmentation in the global economy.”
“As banking sector we will be in a very collaborative mood for the coming years. We look forward to working closely together with the renewed European institutions. We are very much willing to engage positively and contribute to building a great future for Europe.”
Says Giovanni Sabatini, Chairman of the EBF Executive Committee:
“We need a new push to reinforce the use of financial markets by companies in Europe. Both banks and capital markets are natural partners in the European financing ecosystem; they are complementary. It is clear though that the European CMU project needs a reset. The fundamental and structural obstacles that stand in the way of an integrated Capital Markets Union need to be identified and removed.”
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