Regulation and Supervision

Creating the conditions for transformation needs while ensuring competitiveness

In the aftermath of the 2008 financial crisis, the European banking sector was subjected to a vast number of new regulations. This led to the establishment of the European Central Bank (ECB) as supervisory authority in 2014 and the Single Resolution Board (SRB) as resolution authority in 2016. These measures significantly bolstered the resilience of the EU banking sector and stabilized the financial markets. The ECB once again reaffirmed the solid capital and liquidity positions of the banks it supervises at the end of 2023. The regulatory objectives were achieved, evidenced by EU banks effectively weathering recent market turbulence in the US and Switzerland.

After 16 years of regulatory waves, it must now be recognized that each new regulatory requirement constrains banks in fulfilling their role of financing the transformation. Looking ahead, financing resources should increasingly be directed towards addressing major societal challenges such as climate change, digitalization, and peacekeeping. In this context, policymakers emphasize the need to mobilize private capital and should focus on creating the necessary conditions for it.

Basel III as the final step in the regulatory response to the financial crisis

The implementation of the EU banking package ("Basel III") was intended to mark the conclusion of the regulatory response to the financial crisis. Any additional regulation not only limits financing capacities, but also diminishes competitiveness. European banks are already less profitable in global comparison, but profitable banks are crucial for ensuring financial stability and financing of the transformation in the long-term.

Reducing complexity: dare to be more principle-oriented

The high administrative costs of regulation should be reduced. To this end, the existing regulatory framework should be evaluated as a whole and streamlined to remove superfluous or overlapping requirements. For example, the upcoming revision of the macroprudential framework should be used to make the capital buffer concept simpler and more flexible. On the other hand, we propose stopping the momentum towards ever more detailed regulations and replacing it with more principle-oriented regulation and supervision. At the same time, it must be ensured that the regulatory corset is not too tight in order to enable the rapid and unbureaucratic use of artificial intelligence. A long-term regulatory vision is therefore required. In this context, we also welcome the European Commission's proposal to reduce the number and scope of bureaucratic requirements in the area of reporting obligations by 25%. The initiative should also be extended to other requirements.

Revitalizing securitization as a transformation instrument

Regulatory requirements should not hinder the urgent revival of the securitization markets, necessary for financing the transformation. Unlike in the United States, European securitization markets have not yet returned to their pre-financial crisis levels. One significant reason for this is likely the high capital requirements associated with such transactions for banks. These requirements should be comprehensively reviewed in terms of their risk adequacy, as envisioned in the Capital Requirements Regulation (CRR). Existing transitional arrangements should be extended and expanded, while excessive disclosure requirements - especially for private transactions - should be significantly reduced.

Ending the bank levy at EU level

To further provide funds for transformation financing, we also advocate for the discontinuation of the EU bank levy once the Single Resolution Fund (SRF) reaches its target level for the first time. The SRF, which banks filled with their own funds by the end of 2023, has significantly surpassed its initial target of 55 billion euros, reaching around 78 billion euros. However, as noted by the SRB, this increase is not due to an increase in the banks' risk appetite, but solely to an increase in covered deposits. Therefore, we firmly oppose any dynamic expansion of this instrument beyond its initial buildup phase. Maintaining the collection of the EU bank levy would result in the fund being significantly overcapitalized beyond its current level.

Harmonization and evaluation of sustainable finance regulation

We also consider it urgently necessary to review and align the various legal acts of sustainable finance regulation (taxonomy, SFDR, CSRD, CS3D, ESG aspects in other supervisory regulations and various ESG data collections) for consistency. This applies in particular to the requirements for ESG data. The aim here is to eliminate duplication and reduce the level of detail as much as possible. Regulatory greenwashing measures can only be effective once a consistent framework and a valid data basis have been created. The principle-based provisions of the CSRD are almost lost in the granularity of the European Sustainability Reporting Standards (ESRS). The compliance costs were underestimated: hardly any company or bank can fully implement the ESRS requirements with its own resources. Furthermore, the green asset ratio in accordance with the EU taxonomy must be reconsidered in order to increase its informative value. Last but not least, we are in favor of regulatory capital requirements continuing to be risk based. The banking supervisory framework must not be used to implement political objectives.