State Aid rules for banks in difficulty
The European Savings and Retail Banking Group (ESBG) welcomes the initiative of the European Commission to launch a targeted consultation aiming at reviewing the State Aid rules for banks in difficulty.
The potential revision will assess the fitness of the current rules regarding burden-sharing, market discipline, financial stability, and the protection of taxpayers among other things. The modernized framework should ensure that the State Aid rules are applied proportionally, are adapted to the crisis management and deposit insurance (CMDI) legislation and are specifically targeted at different kinds of bank crises.
ESBG argues that all DGS measures available under the CMDI framework applied in accordance with the rules established by the DGSD and the BRRD/SRMR, regardless of national specificities in the design, the governance, and the functioning of DGSs, should be exempted from the application of the regular State Aid control rules. It should be made clear that when DGS funds are used for support measures, State Aid rules should not be applicable and no notification to the Commission be required. Exempting the application of the State Aid rules on actions under the CMDI framework will allow the effective and undisturbed use of measures foreseen under DGSD/BRRD/SRMR.
Furthermore, and until such improvements are effectively achieved, ESBG finds it important to avoid any increase in contributions to the national DGS and to the Single Resolution Fund (SRF).
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Proportional and clear guidelines would ensure citizens' data protection and foster innovation
The ESBG, together with eight other associations representing the EU payment sector, has written to the European Data Protection Board, the European Commission and the European Banking Authority about the EDPB Guidelines 06/2020 on the interplay between the reviewed Payment Services Directive (PSD2) and the General Data Protection Regulator(GDPR).
The letter highlights that while the payments sector remains fully committed to ensuring the protection of EU citizen’s data- including within the framework of PSD2 – there are concerns that the enforcement of the Guidelines will lead to an outcome that is not in line with PSD2 objectives. In the end, this would hinder innovation and competition in payments.
Although the final Guidelines help in clarifying certain aspects of the interplay, our letter emphasises and reiterates common concerns:
- Provisions on data minimization create uncertainties and are potentially in conflict with PSD2;
- There is lack of coherence with the Regulatory Technical Standards on Strong Customer Authentication and Common and Secure Communication (RTS on SCA & CSC);
- Financial transaction data should not be considered as special category of personal data (SCPD). As such, if financial transaction data is not processed in order to infer SCPD, Article 9(1) GDPR should not apply.
- There are resulting concerns that national Data Protection Authorities could start taking a differentiated approach to the interpretation of the provisions, resulting in fragmentation across the EU and adding to a growing trend when it comes to GDPR implementation.
Overall, the EU payments industry welcomes further discussion between all relevant institutions and stakeholders in the GDPR-PSD2 ecosystem to address these challenges and to provide legal certainty for all actors to enable them to meet their obligations and continue to provide top-tier services for their customers.
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ESBG welcomes EBA's greater emphasis on proportionality
ESBG welcomes that the EBA is placing greater emphasis on proportionality in regulation, and hopes that this will pave the way for more proportionality in future regulations. However, more can be done to improve the proposed classifications, increasing granularity and have a paper which better explains how the ideas could be implemented.
We welcome the EBA’s commitment to using, primarily and as far as possible, already existing data from its database of supervisory reporting. However, if more data is required from financial institutions, we urge the EBA to deliver on the promise that these collections are proportionate to the complexity of the underlying requirements itself and to the burden of institutions and supervisors to deliver such data.
We consider the step-by-step approach to be suitable in principle. However, the procedure in step 2 is not clear. In our view, the proposals for the metrics are not yet fully developed. It is not sufficiently clear how on this basis – without concrete benchmarks – the decisions of a political expert can be better supported.
ESBG very much appreciates the inclusion of a classification for co-operative and savings banks. These banks are by nature local, rather small banks with a low-risk profile and a focus on core banking business. We urge the EBA should ensure that the proportionality considerations are also applied to small and non-complex institutions that are part of a consolidated group, particularly credit institutions that are only locally/regionally active and therefore do not have a systemic impact.
We would like to point out that Classification III has clear disadvantages compared to Classifications I and II. Institutions that are to be subject to the strictest regulation are to be delimited by means of a size criterion (€ 30 billion balance sheet total; point 31 lit. d of the EBA discussion paper). A delimitation on the basis of the balance sheet total would contradict the basic idea of a sufficiently differentiated regulation on the basis of the pro-portionality principle.
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The Proportionality Card: A needed part of EU regulatory framework
How can the locally focused savings and retail-banking model contribute to further growth in Europe? On the policy front, financial legislation should weave in the principle of proportionality. That means rules applied to all financial institutions, taking into account a bank’s size, nature of its activities, complexity, risk profile and business model. Proportionate regulation should not be linked to size only.
Less risk must lead to less bureaucratic burden for our 650,000 service-driven employees and for our clients. Different regulatory regimes for different banking models would help local and regional banks – oftentimes smaller and less risky – to compete on an equal footing with other players. Doing so would give Europeans better access to much-needed finance.
The prudential area remains a cornerstone of the proportionality debate. The Basel agreements provide a perfect example of rules designed for large, internationally active banks. Requiring huge administrative and compliance efforts, Basel rules applied to every bank in the same way will lead to a distortion of a level playing field. EU policymakers have an opportunity to change course, and end the regime that requires every bank on the continent to be compliant with the full Basel rulebook. ESBG members are well capitalised with an average CET1 ration of 15.3 per cent, higher than the industry average in EU markets where our banks are present.
Recently, some legislation used proportionality. The latest “risk reduction measures package” included reforms of the Capital Requirements Regulation and Capital Requirements Directive, with some elements of proportionality introduced in the prudential ruleset.
More elements of proportionality should be reflected in existing and future EU banking rules. Relatedly, overabundant regulation affects the financial services workforce too. Proportionality can help boost service levels by reducing the burden faced by bank employees when complying with EU banking rules.
At international level, Basel IV rules were agreed upon several months ago. The big question now is just how will EU decision-makers transpose this agreement into EU legislation? It is imperative that EU decision-makers take into consideration the nature, scale and complexity of the activities of European credit institutions. Given that financing via credit institutions remains by far the most preferred way of external financing for EU citizens and SMEs, Europe must keep a well-functioning banking sector that fulfils its special role in people’s economic lives.
In addition, ESBG favours a break from new waves of regulatory initiatives. It is high time to evaluate the functioning and consequences of current legislation before taking any additional initiatives. One example is MiFID II, where regulation has created a cumbersome process that stifles the commercial process to the detriment of financial institutions and customers alike. Implementing new rules – and complying with them – hit smaller and less-complex institutions particularly hard.
related
The Proportionality Card: A needed part of EU regulatory framework
How can the locally focused savings and retail-banking model contribute to further growth in Europe? On the policy front, financial legislation should weave in the principle of proportionality. That means rules applied to all financial institutions, taking into account a bank’s size, nature of its activities, complexity, risk profile and business model. Proportionate regulation should not be linked to size only.
Less risk must lead to less bureaucratic burden for our 650,000 service-driven employees and for our clients. Different regulatory regimes for different banking models would help local and regional banks – oftentimes smaller and less risky – to compete on an equal footing with other players. Doing so would give Europeans better access to much-needed finance.
The prudential area remains a cornerstone of the proportionality debate. The Basel agreements provide a perfect example of rules designed for large, internationally active banks. Requiring huge administrative and compliance efforts, Basel rules applied to every bank in the same way will lead to a distortion of a level playing field. EU policymakers have an opportunity to change course, and end the regime that requires every bank on the continent to be compliant with the full Basel rulebook. ESBG members are well capitalised with an average CET1 ration of 15.3 per cent, higher than the industry average in EU markets where our banks are present.
Recently, some legislation used proportionality. The latest “risk reduction measures package” included reforms of the Capital Requirements Regulation and Capital Requirements Directive, with some elements of proportionality introduced in the prudential ruleset.
More elements of proportionality should be reflected in existing and future EU banking rules. Relatedly, overabundant regulation affects the financial services workforce too. Proportionality can help boost service levels by reducing the burden faced by bank employees when complying with EU banking rules.
At international level, Basel IV rules were agreed upon several months ago. The big question now is just how will EU decision-makers transpose this agreement into EU legislation? It is imperative that EU decision-makers take into consideration the nature, scale and complexity of the activities of European credit institutions. Given that financing via credit institutions remains by far the most preferred way of external financing for EU citizens and SMEs, Europe must keep a well-functioning banking sector that fulfils its special role in people’s economic lives.
In addition, ESBG favours a break from new waves of regulatory initiatives. It is high time to evaluate the functioning and consequences of current legislation before taking any additional initiatives. One example is MiFID II, where regulation has created a cumbersome process that stifles the commercial process to the detriment of financial institutions and customers alike. Implementing new rules – and complying with them – hit smaller and less-complex institutions particularly hard.
