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European regulation must pay more attention to the interests of regional credit institutions

European regulation must pay more attention to the interests of regional credit institutions

German Savings Bank Association Chief Fahrenschon addresses banking policy at event in Brussels

>> See the story at the German Savings Bank Association (DSGV) website​

​​​BRUSSELS, 18 February 2016 – At the Hessian Regional Banking Conference held today in Brussels, Georg Fahrenschon, President of the German Savings Banks Association (DSGV), called for a change in financial market legislation at EU level. 

“We need priority for small and medium-sized banks because they bear the brunt of financing for enterprises and self-employed persons, they provide a stable foundation for our national economies, and they are the partners of savers throughout Europe”, said Fahrenschon.

Uniform standards that are appropriate for big banks, he argued, could subsequently not be sufficiently adjusted to meet the requirements of local and regional principal banks. As a result, this would often lead to a disproportionate burden to be shouldered by the credit institutions. Fahrenschon: “The question to be asked before any regulation is introduced must be whether it will help to preserve or even strengthen the efficiency of local and regional banks. The approach adopted in the United States, where regulation applied to the small number of big, internationally operating banking groups is different from that applied to the many thousands of community banks and credit unions, should serve as a model for the European Union.”

In addition, Fahrenschon warned against underestimating the impact that the political discussions in Brussels and Frankfurt would have on savers. Low interest rates, abolition of cash, deposit guarantee schemes – the discussions about these issues had caused uncertainty and had met with disapproval among citizens. “We should not constantly subject people’s trust in our financial and economic system to new stress tests. People’s need for freedom and security must be taken seriously.” For the European deposit guarantee scheme, this meant that all players would have to live up to their responsibility, but mandatory liability should not be imposed in Europe.

Fahrenschon welcomed the fact that the discussion about the question as to whether the United Kingdom would stay within the EU had put the topic of subsidiarity back on the political agenda. Fahrenschon: "Policy-making must be in the interest of the people; it must not take on a life of its own behind the glass façades of European institutions. In my view, this is the key to more acceptance of Europe by its citizens.”

Proportionality; Deposit Guarantee Schemes