ESBG concerns mount over looming tweeks to capital adequacy framework
BRUSSELS, 24 July 2015 – ESBG members expressed this week concerns with policy leaders around recent proposed measures to reduce the risk-sensitivity of the current capital adequacy framework.
In a two-and-half-page letter dated July 22 and addressed to Europe's bank standard-setting heavyweights, including Basel Committee Chairman Stefan Ingves, German Finance Minister Wolfgang Schäuble and EU Commissioner Jonathan Hill, the savings and retail bank trade body urged policymakers to proceed with great caution when tabling risk-related regulatory amendments.
Also sent to fifteen members of the European Parliament as well as EU members states who form part of the G20, the letter warns policymakers that Basel Committee considerations would deeply impact Europe’s diversified banking market structure. Notably, ESBG restated unease around any attempts to adjust upward the leverage ratio and highlighted the risks of limiting the availability of internal ratings-based models. Both would render the current regulatory framework less risk-sensitive, ESBG argues, and embolden banks to boost margins and curb SME lending. The result would foment a clash with EU policymakers’ stated ambition for small businesses to flourish.
The letter also alerts policymakers that a lending squeeze could follow from a Basel Committee move to set the leverage ratio requirement above three percent. Revising capital floors, coupled with the proposed revision of the Credit Risk Framework for the Standardised Approach, would also deal a untimely blow when financing jobs-producing, often export-driven part of the overall economy. Such a move would clash directly with stated goals by EU policymakers to boost the real economy’s share of the EU economy – anchored by SMEs – to 20 per cent by 2020.
>> See the letter sent to Commissioner Hill
>> See the ESBG policy section Safeguarding Deposits