It is of crucial importance that the EU framework takes into account the specificities of credit institutions to a greater extent while implementing Basel III, allowing for a certain degree of differentiation. Savings and retail institutions should be subject to adjusted requirements in accordance with their business model in order to safeguard their financing capacity.
Updated: January 2017
In light of the new legislation, ESBG has advocated that the original one-size-fits-all approach was not appropriate, as this may cause difficulties for savings and retail financial institutions in Europe, in particular to account for specific characteristics of savings banks. Indeed, the introduction of stricter prudential requirements will inevitably have repercussions on the capacity for institutions to finance the real economy, and in particular on SMEs which play a crucial role in the development of sustainable growth and job creation in the EU. As SMEs depend on loans for the majority of their financing, they would suffer significantly from a rise in the cost of credit, which would result in slowing their investments and efficiency.
This is why, in order to preserve the diversity of the European banking landscape, it is indispensable to keep ensuring that institutions' specificities are taken into account within the implementation of the CRD V package and its future developments through a proportionate application of its provisions according to institution size and complexity and the riskiness of their activities. This has been achieved, in particular through the acknowledgement of particular instruments as Core Equity Tier 1, the recognition of specific structures for deductions, and a decrease (still provisional) in the risk weights associated with SMEs.
Even though realism has prevailed and most of our concerns have been taken on board, much remains to be worked out in the near future both at international and European levels, in particular with regards to the calibration of the leverage ratio and the review of risk weights.
Following the international Basel III Accord, the European Commission adopted on 20 July 2011 a legislative package to strengthen regulation of the banking sector by enhancing capital requirements and introducing liquidity provisions. The proposal aimed to replace the Capital Requirements Directives with a directive and a regulation. The Directive (CRD IV) governs access to deposit-taking activities while the Regulation (CRR) establishes prudential requirements. The CRD IV package entered into force on 17 July 2013, and its implementation started on 1 January 2014. Meanwhile, EU decision-makers and stakeholders discuss
the CRD V and CRR II, which were proposed by the Commission in November 2016.
In the international arena, the Basel III rules have been elaborated by the Basel Committee with the intent to apply them to big, internationally active financial institutions. However, the CRR/CRD IV, which implements these rules in the EU legislative framework, is applied by all 8,200 banks in Europe, irrespective of their size, complexity or business models.