BRUSSELS, 23 January 2017 – The need persists for policymakers to better weave into EU law the principle of proportionality, concluded attendees of ESBG-hosted workshop held today.
More than 50 people attended the event from the banking sector, policymaking bodies and stakeholder groups to discuss how the principle can be better applied when adjusting existing and upcoming regulation, especially as banks face challenges such as the low interest rate environment, cost pressures from innovation and a razor-thin profit margins. Participants also looked how ESBG members – representing 1000 locally minded savings and retail banks in Europe – and other financial institutions, can carry out their daily work such as SME lending under a non-detrimental rules framework.
Two panels with experts from the banking sector, Europe's SMEs, employees, the academic world and the policymakers from the European Parliament, European Commission, and European Central Bank gave attendees a chance to assess the political and practical aspects of proportionality in European legislation. The workshop is important and timely because policymakers are now working on the CRD package review and other legislative initiatives that are considered by regulators and supervisors as essential elements for increasing bank resilience and strengthening consumer confidence.
Panellists and speakers at the morning meeting included:
- Giulia Bertezzolo, European Commission
- Fons Borginon, on behalf of the Coordination of Belgian Savings and Network Banks
- Michael Budolfsen, UNI Europa Finance
- Michael Engelhard, DSGV – the German Savings Banks Association
- Gerhard Huemer, UEAPME – The European Association of Craft, Small and Medium-sized Enterprises
- Othmar Karas, Member of the European Parliament
- Mattias Lehmann, Bonn University and European Banking Institute
- Martin Merlin, European Commission
- Karl-Peter Schackmann-Fallis, DSGV – German Savings Banks Association
- Herbert Vallant, Austrian Savings Banks Assocation
- Jukka Vesala, European Central Bank
- Andrew Watchman, EFRAG – European Financial Reporting Advisory Group
Why proportionality is important
With the publication of the Commission's capital and resolution package on 23 November 2016, proportionality has been acknowledged as being a common thread throughout legislative proposals. Savings and retail banks see the need for it to be even further applied from a regulatory and supervisory standpoint. ESBG argues that proportionate banking rules should account for factors such as an institution's size, business model and interconnectedness, whilst following the principle of subsidiarity as set out in the Treaty on the European Union.
ESBG releases Proportionality 'Toolbox'
ESBG released on the day a new document, called the Political Toolbox on Proportionality. The three-page sheet provides an introduction to the principle of proportionality while delving into specific aspects of it towards banking laws. More specifically, the toolbox presents criteria that should be referred to when applying the principle, such as size, the type of business model and complexity and interconnectedness. Beyond these criteria, ESBG a quantitative assessment could be envisaged, for instance based on the outcome of the Supervisory Review and Evaluation Process (SREP). ESBG also includes in the toolbox its proposal that the level of application of the principle be set at both solo and consolidated level.
Proportionality should also take into account the scope of application, ESBG argues in the paper, in particular around products. On implementation, it notes that regulators at both levels 1 and 2 should take into account the necessity to draft laws in accordance to the principle. It also calls on Member States to set up at national level a "watchdog" committee to ensure that the proportionality principle is respected. Their proposal to form Member State-based committees would complement the independent committees already suggested in the EBA Banking Stakeholder Group report released in late 2015.
>> Discover more about the workshop
>> Learn about ESBG position on proportionality
>> See new ESBG paper "Political Toolbox on Proportionality"