WSBI-ESBG Managing Director, Peter Simon, discussed Basel IV, CMDI and SVB at the Politico Finance Summit 2023

WSBI-ESBG Managing Director discusses Basel IV, CMDI and SVB at the Politico Finance Summit 2023 On 23 March, WSBI-ESBG Managing Director Mr Peter Simon discussed the priorities of the association on Basel IV, the Crisis Management and Deposit Insurance (CMDI) framework and the Silicon Valley Bank (SVB) case at the Politico Finance Summit 2023 held in Paris
The other panellists included the European Parliament Rapporteur on the Banking Package, MEP Jonás Fernández (S&D) and the EBA Chairperson, Mr José Manuel Campa. This year’s Finance Summit brought together a great many of speakers & panellists from the European Parliament, the European Commission, representatives of several Central Banks along with high-impact EU-affiliated associations and Mr. Peter Simon was the only panellists from the financial and banking sector, thus, he was the voice of retail and savings banks that WSBI-ESBG represents.

The EBA Chair and the EP Rapporteur highlighted the importance of a timely and faithful implementation of the outstanding Basel IV reforms in the European Union. According to them, it would be essential to ensure banks can withstand future crises and a necessary condition for the proper functioning of the European and global financial systems. Looking at the ongoing trialogues, attention was drawn to the proposed deviations from Basel in the respective positions of the co-legislators, which may undermine the credibility of the EU financial system.

Stressing that the EU already applies the Basel rules to all its banks, and that EU banks are currently better capitalized with stronger liquidity ratio than 15 years ago, ESBG recalled the importance of achieving a proportionate and balanced implementation of the international standards in the EU regulatory framework.

This approach would preserve the diversity of the business models which characterises the European landscape, thus enhancing further financial stability and a global level playing field. Among others, ESBG recalled the need to apply the output floor as envisaged in the Basel text, i.e. at the highest level of consolidation, and to keep the transitional arrangements for unrated corporate and low-risk mortgages until Europe implements proper solutions to the underlying issues.

On the SVB collapse, panellists agreed that the case should be read in terms of bad management and lack of appropriate supervision. It was stressed that SVB is not a small bank (more than $200billion assets) and that its business model, characterised by a very concentrated deposit base on tech-firms and venture capital companies, cannot and should not be compared to any European bank.

Diverging views were brought to the table on the upcoming CMDI review, with ESBG calling for an evolution of the framework, not a revolution. The principle of duality under which some entities are to be resolved and some others are to be liquidated under national insolvency proceedings (NIPs) should be maintained. MEP Fernández on the other hand hopes that the Commission will move forward with the European deposit insurance scheme (EDIS) and called for harmonised rules in terms of hierarchy of claims in liquidation.