Further relief needed for small and medium-sized banks in Europe
- Banking package will bring some relief
- Nevertheless, discussions have to continue on various issues and laws
- Nine European banking associations issue joint position paper
The European banking associations of Austria, Croatia, Denmark, Germany, Italy, Luxembourg, Poland, Slovakia and Slovenia find that for small and medium-sized banks, in particular, the high degree of financial regulation is extremely onerous and disproportionately costly. More than 80 per cent of small and medium-sized banks in Europe are located in these associations’ home countries. Even though the EU banking package has introduced some initial measures to relieve the strain on these banks, further action is needed. As the nine European banking associations explain in a joint position paper, this applies, among other things, to the reporting regime and remuneration requirements.
The aim is not to undo sensible regulation, the banking associations stress: the same capital and liquidity requirements should continue to apply for the same risks. But a number of measures neither make good sense given the size of the banks involved, nor do they contribute to financial stability. Costs are clearly out of all proportion to the associated benefits.
As an example, the banking associations cite reporting requirements. These generate a vast number of pages and figures, which cause banks a massive amount of time and effort that is totally disproportionate to the gain in financial stability. The associations therefore strongly support the completion of the EBA mandate to, among other things, make recommendations on how to reduce reporting requirements.
A further case in point is the rules on remuneration. Though these are only relevant for a handful of big banks, the complex rules have to be implemented by all financial institutions in equal measure with all the time and effort this entails.
The joint position paper of the banking associations can be found at.