European Commission urged to take ‘fresh look’ at proposed banking reforms

In a joint letter to the Commission’s first vice-president Frans Timmermans, the British Bankers’ Association and the French Banking Federation (FBA) said (3-page / 192 KB PDF) the Commission’s proposals in their current form “could have a negative impact in financing European countries, which is counter to the EU’s efforts to restore growth and improve employment”.

The letter to Timmermans, whose responsibilities include promoting better regulation in the EU, said recently published results of the asset quality review and stress-tests, coordinated by the European Central Bank and the European Banking Authority, “had been welcomed” by the members of the previous Commission.

According to the letter, the results also “showed that the larger banks, and especially the global systemically important banks (GSIBs), are now safer than before the financial crisis and the prospect of future failure is a remote prospect”.

The letter said “no European GSIBs failed the assessment or as a result need to raise further capital”. According to the stress tests, “trading assets are not a source of excessive risks taken by the 130 banks supervised by the ECB”, the letter said. Impairment on financial assets “account for only €12 billion, compared to a global capital depletion of €182bn in the adverse scenario”.

The letter said the BBA and FBA “remain firmly of the view that the European Commission has not answered the concerns held by many about the damage that would be done to the ability of banks to service customers in the event of the structural reform measures being imposed as currently drafted”.

“National legislation addressing the aim of the Commission’s proposal is already in place in the UK and France,” the letter said. “After significant consideration of the implications, the Commission’s proposals introduce substantial uncertainty to the implementation of these national regimes without presenting an adequate case for the incremental benefits that would arise when compared to the delay to implementation, which would inevitably arise due to a change in course. While the Commission’s proposal may have a short deadline, we are not convinced that this is compatible with the further legislative and regulatory processes necessary.”