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Banking rules must adjust to “game changing” digital push

Banking rules must adjust to “game changing” digital push
LONDON, 5 February 2016 – Banking legislation will have to keep pace with the new era of digitalisation for Europe's banks to thrive, ESBG Managing Director Chris De Noose this morning warned policymakers, regulators and bankers meeting in London. Speaking during a panel discussion at the European Banking Authority (EBA) conference at Guildhall, De Noose signaled to lawmakers that digitalisation is a "game changer" which will alter the way banks, including savings and retail banks, do business.

De Noose said: "Legislation will have to catch up with this reality, both ensuring that all actors are subject to it and must be designed not to hamper innovation."

Capital Markes Union and SME lending

De Noose also touched on whether new Capital Markets Union regulation can revive lending by banks to small and medium-sized businesses (SMEs). He framed the use of capital markets as a complement to bank lending. Citing a recent ESBG study, he added that corporates both in the EU and the US rely heavily on banks to finance. The reliance on banks is especially true for SMEs, where bank lending is the top choice. Thirty-seven per cent of SMEs in the EU borrow from banks when fulfilling financing needs. In the United States, more than 70% of businesses with less than 500 employees use bank financing to start or acquire a business. Already existing businesses turn to banking institutions in 44% of the cases for financing expansion or capital improvements.

Better regulation

To make financing the "real" economy easier, De Noose put focus on the need for policymakers to address the avalanche of hugely detailed rules. His remarks echoed conclusions contained in a recently released study by the EBA Banking Stakeholder Group, which presented a strong case to apply the principle of proportionality, whereby balance is sought between the costs and benefits of EU financial regulation. He also noted that the idea of a simplified Single Rule Book mentioned by the EBA could also be of great help.

ESBG sees the recently completed European Commission call for evidence around the EU regulatory framework for financial services an extremely useful approach to avoid unintended consequences and limit inconsistencies between bank legislation. He described the call for evidence as an especially helpful step to address consumer protection rules, especially MiFID, PRIIPs and the Insurance Distribution Directive.

>> Learn more about the EBA BSG paper on Proportionality

>> See the ESBG position on Capital Markets Union

>> See the ESBG submission to the European Commission call for evidence


Proportionality; SME finance; Capital Markets; Capital Markets Union; European Institutions; European Supervisory Authorities (EBA-ESMA)