27 October 2021 – The European Savings and Retail Banking Group (ESBG) calls on
the European Parliament and the Council of the EU to reconsider the output
floor implementation on a ‘single-stack’ approach included in the European Commission’s
proposal for the finalisation of the Basel III standards in the EU, announced
The ‘single-stack’ approach would mean
applying the output floor to EU-specific capital requirements, on top of
internationally agreed ones. ESBG calls for the use of the ‘backstop approach’,
meaning applying the floor only to internationally agreed capital requirements.
The ‘backstop approach’ would help preserve and strengthen the EU’s diverse
banking system. Otherwise, the ability of Europe’s diversified banking sector
to provide finance to the real economy and foster economic growth could be
“ESBG and its members believe that the
Co-legislators should implement the Basel III framework adapting it to the
specificities of the European banking market, where needed. This includes an
application of the output floor that does not exceed what is explicitly laid
down in the agreement on the finalisation of Basel III”, said Johanna Orth,
Chair of ESBG’s Task Force on Basel.
The package of reforms to finalise the
Basel III framework is designed for internationally active banks. Therefore, when
implemented within the EU regulatory framework the EU special features should
be considered, including those which are already enshrined in the banking
regulation. In particular, the so-called SME supporting factor should be
retained, as it provides the right incentive to stimulate real economic growth.
“The implementation of the Basel standards
within the EU regulatory framework should reflect the proportionality
principle, taking into consideration the risk nature, scale and complexity of
the activities of European credit institutions”, said ESBG Managing Director, Peter
This would allow financial institutions to
carry out their activities under a non-detrimental regulatory framework which
strengthens the European banking sector – the backbone of the EU’s ‘real
economy’. A disproportionate regulatory weight also would negatively impact
banks, which would be overburdened with regulatory requirements that could even
push resources away from customer service.
The EU banking sector’s diversity ensures
that a full range of services is offered to customers at competitive prices, in
particular by banks that focus on SMEs, households and local communities.
In this context, ESBG is looking forward to
bringing the voice of its members to the upcoming legislative process. We believe
that close cooperation among all stakeholders will be indispensable for the
successful implementation of the finalised Basel III standards. We encourage the EU decision-makers to make full use of the
discretions envisaged in the Basel III text, including those on operational
risk, which will be crucial for continuous and solid credit provisions to the
real economy after the implementation phase.