New taxes on banks can affect economic growth
In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals.
BRUSSELS, 6 September 2022 – European savings and retail banks played a very relevant role during the Covid-19 pandemic, contributing to sustain businesses and families during lockdown periods and beyond, while closely cooperating with the authorities to avoid a credit crunch. They have also been publicly recognised in many jurisdictions as a relevant part of the solution to the post-pandemic economic recovery.
While the effects of the Covid-19 pandemics are still being felt, the EU economy is now facing a new crisis arising from supply chain shortages and the war in Ukraine, in which savings and retail banks continue to support their customers and economic activities in general. Even further, they are actively contributing to helping Next Generation EU funds reach the real economy, by providing additional funding through their extended network of branches covering the whole EU territory and through their expertise in risk assessment.
In the current context of high inflation and economic slowdown, and with the possibility of a recession in the horizon, it is more important than ever that savings and retail banks preserve their solvency. In this respect, the recent decision in some EU countries to impose new windfall taxes on the banking sector will further reduce the latter’s lending capacity to corporates and individuals. These sectorial taxes are discriminatory and unjustified, as the expected increase in interest rates is unlikely to lead to extraordinary profits in the banking sector (they can even decrease if NPLs start to grow). In fact, marginally higher rates simply represent the return to a normal situation after many years of very low profitability due to the negative interest rate environment, which, in turn, has also negatively affected returns to shareholders. These new taxes have also placed financial institutions in a difficult situation with their supervisors, as the requirement of not transferring their cost to customers goes against EU legislation (“EBA Guidelines on Loan Origination” state that loan pricing should include all the costs supported by banks, including taxes).
A tax on the banking sector may also undermine the social work undertaken by savings and retail banks. Social responsibility is a core value of our members; towards their clients, employees, communities, and the environment. In this context, policy makers should carefully consider the negative impact of taxation on banking foundations which have historically been involved in investing in local communities, fighting poverty, and helping those who are the most vulnerable in society.
The EU financial sector already contributes significantly to EU national budgets under the current tax framework, and it is ESBG’s view that what is needed in these uncertain times is a strong and competitive retail banking sector in Europe that continues to fulfil its key function as credit provider to companies (especially SMEs) and families alike. Therefore, any measure that can weaken the recovery of the EU economy should be carefully considered.
Finally, we are also warning against the risk of a fragmented EU tax system and calling for more tax harmonisation across EU countries. Additional taxation at national level is detrimental to a level playing field by distorting competition within the EU internal market. A particular source of distortion arises from shadow banking activity (e.g.: hedge funds) and other non-bank financial players (e.g.: big techs or credit cooperatives) which generally remain outside the scope of windfall taxes applied to the banking sector. For this reason, we believe that uncoordinated national initiatives in the field of taxation should be avoided at all costs in order to provide the necessary conditions for a fair and even distribution of financial services to European citizens and companies; especially SMEs.
Press contact:
Leticia Lozano, Senior Communications Adviser
Tel. +32 2211 1196
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ESBG response to the EFRAG consultation on its first set of draft ESRSs calls to ensure levelled global playing field
ESBG submitted its response to the European Financial Reporting Advisory Group (EFRAG) public consultation on the first set of Draft EU Sustainability Reporting Standards (ESRSs) on 4 August. The consultation comes in response the European Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD) which envisages the adoption of EU Sustainability Reporting Standards (ESRSs). As part of this, the Commission mandated EFRAG to provide technical advice in the form of draft sustainability reporting standards.
In its response, ESBG highlighted the need for consistency between the International Sustainability Standards (ISSB) sustainability disclosures and the EFRAG ESRSs in order to ensure a levelled global playing field. Moreover, ESBG emphasises the lack of proportionality with respect to disclosure requirements, specifically for smaller/unlisted companies and proposes the provision of certain reporting requirements being made optional.
With respect to implementation challenges, ESBG considers that the data availability issue is the most critical challenge for financial institutions. Taking into consideration the above, ESBG proposed two phase-in solutions that are mutually complementary: i) first year reporting on own operations and gradual reporting on information from the value chain and ii) prioritisation of climate topics and gradual consideration of other environmental, social and governance topics.
Furthermore, we believe that there is not enough guidance in the exposure drafts with respect to the application of the double materiality principle (the requirements for companies to disclose not only the risks that affect, but also their impacts on society and on the environment). In this sense, this concept needs to be clarified and more guidance is needed in relation to specific sectors in due time.
ESBG stresses the limitation on disclosing value chain information for companies. We consider it is difficult to obtain information from companies that are not under the control of the institution (e.g. associate companies). We propose that a phase-in period of 2 years must be granted to financial undertakings to allow them to adapt their processes to collect the necessary information from their value chain.
As a next step, ESBG will evaluate if there is interest from members in submitting input into the up-coming EFRAG consultations on SME specific standards as well as on sector specific standards (EFRAG consultations are expected to be published in 2023).
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EU Taxonomy minimum safeguards: Criteria for the application of external checks should be further defined
ESBG submitted its final response to the Platform for Sustainable Finance (PSF) consultation on its draft report on minimum safeguards (MS) on 6 September. In its response, ESBG highlights that assessing whether a company complies with the due diligence processes should, other than relying on external checks as only possibility, be demonstrated by: i) proving that the applicable national legislation provides for sufficient guarantees concerning the specific topic; ii) self-declarations made by the client concerning the specific topic.
ESBG submitted its final response to the Platform for Sustainable Finance (PSF) consultation on its draft report on minimum safeguards (MS) on 6 September.
The report is intended to provide advice on the application of the minimum safeguards which bring a social and governance component to the EU Taxonomy. The report looks at human rights including workers’ rights and consumers´ rights, bribery/corruption, taxation and fair competition as core substantive topics for which compliance with minimum safeguards has to be defined. The draft report proposes a two-pronged approach for identifying non-compliance with MS, namely one related to adequate due diligence processes implemented in companies (internal checks) and the other related to the actual outcome of these processes or the company’s performance (external checks).
In its response, ESBG highlights that assessing whether a company complies with the due diligence processes should, other than relying on external checks as only possibility, be demonstrated by: i) proving that the applicable national legislation provides for sufficient guarantees concerning the specific topic; ii) self-declarations made by the client concerning the specific topic.
Moreover, ESBG emphasises that gravity thresholds for non-compliance should be defined, so that not every minor violation (e.g. of taxation or work laws) leads to the establishment of an external check.
Furthermore, when assessing compliance with MS, the report recommends that the focus should be on assessing the human rights due diligence processes of a company, rather than on controversy checks e.g. media coverage (currently employed by ESG ratings agencies), as it is considered that the latter is based on value judgement and is sometimes difficult to justify. ESBG believes that the administrative cost derived from direct analysis of due diligence processes would be too burdensome for institutions and emphasizes that they should rely on ESG ratings agencies in order to not impair financial activity.
Finally, ESBG calls for further clarifications on the level of application of MS in particular cases, e.g. an exposure to a company active in sectors that by definition do not fulfil the minimum safeguards to be taxonomy-eligible or -aligned, even if the specific transaction finances activities that fulfil all requirements.
As a next step, the Platform will analyse the feedback received and prepare the final report. ESBG will continue to monitor this very important topic, with the possibility to get involved at a later stage.
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Unpacking the customer through demand side data
Scale2Save Campaign
Micro savings, maximum impact.
WSBI's Scale2Save programme launched the sixth case study of its Savings and Retail Banking in Africa research series. The publication 'Unpacking the customer through demand side data' gives examples of financial service providers who have used public data to develop customer-centric products and services.
Available in English and French, it presents examples of financial service providers (FSPs) who have used data to better understand and serve low-income customers by developing customer-centric solutions. It includes examples from WSBI members Awash Bank Ethiopia, BRAC Uganda Bank Limited and Zambia’s Zanaco.
Why read this case study?
Because it shows that data and research are valuable tools to acquire and retain customers and expand the customer base. This is crucial to attracting new customers in Africa, where informal employment is commonplace.
The development of customer centric products and operations helps ensure that customers who engage with the bank continue to do so, by aligning products with customer needs, and retiring them if they no longer do.
Scale2Save
For a single market for data to push growth and innovation
ESBG submitted its response to the European Commission (EC) targeted consultation on an Open Finance Framework and data sharing in the financial sector on 15 July.ESBG and its members highlighted that they share the objectives of the EC’s data strategy and the commitment to create a single market for data that will constitute a potential source of growth and innovation.
A European approach to data is essential to ensure competitiveness, avoid fragmentation, benefit from an effect of scale and guard against windfall effects from which certain non-European players could benefit. A flourishing data-driven market should be based on principles of mutual benefits and right incentives for all market participants. Therefore, a fair share of value and risk is a fundamental prerequisite for the success of data sharing.
In an open finance framework, the principle “same activity/data, same risks, same rules” shall apply to all actors, including third party providers, ESBG said in its response. To ensure customer’s trust, every third party accessing customer data shall ensure privacy rights and data protection in compliance with all applicable rules. As such, we suggest third party within the financial sector be subject to the same licensing requirements and to supervision by competent authorities.
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PSD2 review must seek fair distribution of value and risk among all market participants
ESBG submitted its response to the European Commission (EC)’s targeted consultation on the review of the revised payment services Directive (PSD2) on 15 July. In it, ESBG and its members stated that the core principle of PSD2 – access to data free of charge – did not foster the best outcome and that the PSD2 implementation has been a highly complicated and costly process for the whole market.
For banks, in particular, the investments required for the implementation of PSD2 have been unproportionally high without a chance of a return. More in general, the significant investment levels do not match the limited economic benefits for the market and the end-consumer.
Therefore, the review of the PSD2 should seek a more balanced approach, with a fair distribution of value and risk among all market participants.
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Number of unbanked adult EU citizens more than halved in the last four years
Nevertheless, more than 13 million adults, or 4% of the adult population, face financial exclusion, according to an ESBG analysis of the Global Findex Database 2021, recently released by the World Bank.
BRUSSELS, 14 July 2022 – The number of unbanked citizens more than halved over the past four years, but more than 13 million adult EU citizens still lack access to formal financial services, with room for Europe’s savings and retail banks to continue contributing to financial inclusion.
The European Savings and Retail Banking Group (ESBG) conducted an analysis of the Global Findex Database 2021 recently released by the World Bank, and was pleased to find that the number of banked adults in the EU has climbed.
This significant improvement can be attributed to increased efforts from the banking industry, including notably the ESBG membership serving 162 million Europeans, as well as to an increased move towards digitalisation spurred by the pandemic.
“Financial inclusion is at the core of our members’ vocation and they put great efforts on serving individuals, families and SMEs, with a focus on leaving no one behind, which has surely contributed to the improvement of financial inclusion in the block”, said ESBG Managing Director, Peter Simon.
According to the World Bank Findex (which has no data for Luxembourg over 2021), 3,6 % of Europe’s population remain financially excluded, an improvement from the 8,2% reported in 2017. This percentage translates to some 13 million adult citizens being unbanked in 2021, down from close to 31 million in 2017.
Part of the remaining unbanked are probably less-digital savvy people and banks need to continue cater for that segment. Without any doubt, all the unbanked rely on cash to participate in the economy and therefore banks must play a responsible role regarding cash provision.
Looking at some European countries in detail, Romania suffers the highest no-account rate at 30,9%, while neighbour Bulgaria faces the second highest financial exclusion rate at 16%. Following them are Hungary (11,8%), Croatia (8,2%) and Portugal (7,4%). Compared to the 2017 data, Bulgaria showed nearly an 11 percentage points improvement from 2017 when they reported 27,8% of the population remained unbanked. The Czech Republic and Lithuania significantly improved their unbanked rates over the reported period, dropping out of the top 5 list of EU countries with the highest no-account rates, as Croatia and Portugal replaced the pair.
Best-in-class countries include Denmark, with hardly any unbanked people reported, followed by Germany (0,02% unbanked) and Austria (0,05%). These are followed by the Netherlands (0,3%) and Sweden (0,3%). Austria is the newcomer in this top 5, replacing Belgium. Nevertheless, Belgium, together with 10 other countries have more than 99% of their population participating in banking services.
Table: Financial inclusion in EU Member States, unbanked adults
(Sources and notes: Global Findex – 2021 data on Luxembourg is missing in Global Findex so has been omitted, analysis by WSBI-ESBG)
| 2017 | 2021 | |||
| Country | Unbanked adults 15+ | Relative share | Unbanked adults 15+ | Relative share |
| Austria | 137.700 | 1,84% | 3.761 | 0,05% |
| Belgium | 128.041 | 1,36% | 95.329 | 0,99% |
| Bulgaria | 1.697.604 | 27,80% | 947.642 | 16,03% |
| Croatia | 494.946 | 13,86% | 283.466 | 8,20% |
| Cyprus | 109.767 | 11,28% | 69.197 | 6,87% |
| Czech Republic | 1.703.016 | 19,01% | 456.366 | 5,06% |
| Denmark | 3.947 | 0,08% | 0 | 0,00% |
| Estonia | 22.137 | 2,01% | 6.929 | 0,62% |
| Finland | 9.866 | 0,21% | 21.861 | 0,47% |
| France | 3.270.789 | 6,00% | 419.374 | 0,76% |
| Germany | 613.053 | 0,86% | 16.765 | 0,02% |
| Greece | 1.341.302 | 14,53% | 473.335 | 5,12% |
| Hungary | 2.105.537 | 25,06% | 983.136 | 11,78% |
| Ireland | 173.372 | 4,66% | 13.310 | 0,34% |
| Italy | 3.255.366 | 6,21% | 1.401.949 | 2,71% |
| Latvia | 112.583 | 6,78% | 53.731 | 3,38% |
| Lithuania | 419.049 | 17,12% | 152.777 | 6,47% |
| Malta | 10.302 | 2,64% | 15.982 | 3,55% |
| Netherlands | 51.485 | 0,36% | 39.231 | 0,27% |
| Poland | 4.292.591 | 13,27% | 1.377.061 | 4,28% |
| Portugal | 681.086 | 7,66% | 658.625 | 7,35% |
| Romania | 7.039.982 | 42,25% | 5.031.950 | 30,88% |
| Slovak Republic | 727.964 | 15,82% | 201.923 | 4,38% |
| Slovenia | 43.408 | 2,47% | 16.937 | 0,95% |
| Spain | 2.474.022 | 6,24% | 689.696 | 1,70% |
| Sweden | 21.133 | 0,26% | 26.545 | 0,31% |
| Totals | 30.940.048 | 8,20% | 13.456.879 | 3,54% |
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Nothing found.
On the EU Commission consultation on Distance Marketing in Financial Services Directive review
The publication of the European Commission proposal amending Directive 2011/83/EU and repealing Directive 2002/65/EC, follows the public consultation carried out last year. The Distance Marketing in Financial Services Directive (DMFSD) has historically provided a legal basis for the distance selling of financial products and a minimum safety net for consumers, when there is no specific text (for example, when new products are introduced or for products outside the scope of a specific directive).
ESBG supports the scenario chosen by the Commission for its proposal to retain the relevant and still valid elements of the DMFSD by integrating them into a broader directive (the Consumer Rights Directive 2011/83/EU which is not currently concerning financial products) and to make some adjustments. Thus, a specific chapter dedicated to “Financial services contracts concluded at a distance” has been added to this directive, making it possible to retain the specificities of the DMFSD.
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World savings and retail banks call for harmonised taxonomies on sustainable finance
WSBI Chairman, Isidro Fainé, says banks face the future with hope and optimism, despite the short-term turbulent context.
Paris, 8 July 2022 – The World Savings and Retail Banking Institute (WSBI), a global network representing over 7,000 savings and retail banks, called today on policymakers for the harmonisation of taxonomies on sustainable finance. This as a necessary step for banks to play an effective cross-regional role providing the investment needed to achieve the ambitions of the 2015 Paris Agreement.
At the end of the WSBI World Congress, the association’s members approved the Paris Declaration which detailed the call to policy makers to develop a set of principles for designing taxonomies that are centred on pragmatic and science-based targets.
“As WSBI members are present in remote areas, close to the people, and focus on SMEs and private households, they are aware of the necessity of having ambitious, yet pragmatic, progressive and proportional, targets”, states the document.
The Declaration called for taxonomy design principles that encourage interoperability and mutual recognition to promote cross-border sustainable finance and to reduce compliance costs. It points out the need for a common language to ease comparability while preventing duplication of efforts and points to the EU-China Common Ground Taxonomy (CGT) as a promising first step in the right direction.
The WSBI Chairman, Isidro Fainé, closed the World Congress with a message of optimism despite the short-term turbulent context the world is living.
“The WSBI community of banks is facing the future with hope and optimism. An optimism that translates into specific actions for social progress. This is evidenced by our impeccable track record in the way we do banking, where financial inclusion is our flag and with our philanthropic actions, where our priority is to help those most in need through a wide range of social and educational programmes”, said Isidro Fainé.
The Chairman also emphasised that “the determination of our community to contribute to a better world, as our DNA dictates. Our WSBI members on five continents believe that a better world is possible”.
Founded in 1924, the WSBI members share a business model that has social responsibility at its core and is focused on serving local communities, households and SMEs. WSBI has 65 members in 88 countries. They serve over 1.7 billion customers, have total assets of over 15 trillion dollars, and employ 2.2 million workers.
The 26th World Congress was held in Paris on 7-8 July.
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World savings and retail banks moving forward on sustainability
World Savings and Retail Banking Institute (WSBI)'s members get together for the first time since 2018 at the 26th World Congress, in Paris.
Paris, 7 July 2022 – The World Savings and Retail Banking Institute (WSBI), representing over 7,000 organisations globally and serving some 1.7 billion customers, held today its 26th Congress ‘Regionally rooted, globally responsible’ with focus on how to move forward with financial sustainability in the current challenging times.
“Feeling and acting socially responsible is inextricably linked to our identity. The fact is we were born that way, it forms part of our DNA, and it is our vocation. All of this translates into our way of doing banking that is fundamentally different from other players in the sector, and furthermore, it is profitable, efficient and fair”, said WSBI President, Isidro Faine, as he addressed over 200 participants from 4 continents who gathered today in Paris for the first time since 2018.
Sustainability was the key topic at the centre of the discussions and panels, as savings and retails banks seek the most effective ways to move forward on the topic and contribute to address the pressing environmental needs.
The internationally renowned mountaineer and activist, Reinhold Messner, presented his vision for a sustainable future.
Sustainable financial regulation, the role of the physical branch in the digital era, and the most recent geopolitical shifts were some of the topics covered today.
“This kind of crisis moments are the time that we have to realise our power and to fulfil our duty to the fullest by contemplating on what we can deliver in the face of these challenges,” said WSBI Managing Director, Peter Simon, at the end of the first day of this event.
The 26th World Congress is held in Paris on 7-8 July.
