FROM THE EUROPEAN BANKING FEDERATION:
Risk Reduction Measures Package adopted in the EU Parliament
BRUSSELS, 16 April 2019 — The European Banking Federation sees the final vote today on the Risk Reduction Measures Package by the European Parliament as an important step towards the completion of the Banking Union, aimed at reducing risks in the banking sector as well as enabling banks to be stronger, more stable and more resilient.
Since the 2007 financial crisis, the European banking sector has always been supportive of the work conducted to implement reforms agreed at international level to strengthen the banking sector and address outstanding challenges to financial stability, including the intensive efforts to build this Risk Reduction Measure Package since November 2016.
The EBF regrets that the package failed to overcome most of issues leading to banking market fragmentation across the EU. Important constraints to free flow of capital and liquidity across the EU are still not properly addressed, ending-up in hampering risk-sharing across the Banking Union.
Says Wim Mijs, Chief Executive Officer of the European Banking Federation:
“Today’s vote marks an important step in the implementation of Basel III reform. European banks believe that it now is high-time to take stock of all the banking regulatory reform and assess its efficiency before rushing into additional rules.
“European banks now will have to allocate significant resources to deal with the approximately 70 mandates from the European Banking Authority. These mandates aim at correctly implementing the EU Banking Package in the respective jurisdictions, together with the transposition in EU law of the completion of the Basel III rules.
“To avoid a further deterioration of the profitability of European banks the European Union should now aspire to reinforce the attractiveness of the EU economy, while promoting a competitive banking sector as well as reviving the Capital Markets Union project.”
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]]>EBA consultation on systemic risk buffers: EBF response
BRUSSELS, 30 July 2020 – The EBF has responded to the consultation paper of the European Banking Authority (EBA) on draft Guidelines on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer in accordance with the Capital Requirements Directive.
Key concerns of the EBF members are related to a high degree of complexity of the proposal, the need to ensure consistency in the implementation of the framework, and the need to keep the operational burden for banks low. Therefore, the EBF calls on the EBA to consider the following key concerns:
- The EBA should eliminate overlaps with existing prudential requirements in order to avoid double counting of risks, especially between the systemic risk framework and the Pillar 2.
- The high degree of granularity in our view leads to a bottom-up approach to systemic risk, which raises the question if the framework is suitable to address systemic risk. The EBA may have to carefully review the level of granularity of data and whether those reflect other types of risk, like credit risk.
- The EBA, as the guardian of the Single Rulebook, should seek further consistency in the proposed framework. The current draft gives too much discretion at the national level which can only lead to a fragmentation across jurisdictions.
- The EBA should envisage the use of publicly available data in order to keep the operational burden low.
- We would like to take this opportunity to remind that the systemic risk buffer is an additional European requirement which does not exist in other jurisdictions, thus putting European banks and their clients at a disadvantage. This fact has become evident in the current COVID-19 crisis where authorities have had to ease off the SRB requirement in order to preserve the lending capacity of banks. It is a lesson to be learnt and we would encourage the EBA to issue an opinion for future revisions of the legislation.
EBF Adviser:
Lukas Bornemann, Policy Adviser
l.bornemann@ebf.eu, +32 2 313 32 73
About the EBF:
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from 45 countries. 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 Twitter: @EBFeu
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]]>There is a specific issue in the way bank assets in Europe are valuated. An issue that is blocking the further digital transformation and growth of banks.
Current prudential rules prescribe that the use of banking software is penalised instead of incentivised. Software is still valuated as an intangible asset, making it less worthy than basic office furniture.
In other words, EU banking rules treat software as a cost rather than an investment. Unlike in the US, European banks are forced to cover expenditure on software solutions with the same amount of capital.
Investing in software solutions, updates and development is crucial to remain competitive and to strengthen cybersecurity.
A recent survey conducted by EBF shows that European banks as of 2016 had invested more than €18 billion in software, despite the costly conditions in place.
Without a doubt, financial technology and software solutions have become critical functions of the work in banking.
Even in case of a liquidation, when bank assets are sold, software can still be used and thus proves its value.
If we want to let banks innovate, and therewith the European economy, treating software as an ordinary asset is a pure necessity.
Former MEP Cora van Nieuwenhuizen at the 2017 European Banking Summit:
Remarks by Gonzalo Gasos at the QED Banking Package Review event:
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