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German member says fewer, simpler rules needed for small, low-risk banks

​German Savings Banks Association President Fahrenshon calls for “Small and simple banking box” to make regulation more reasonable.








​FRANKFURT, 2 December 2016 – “Traditional retail banks are groaning more and more under the weight of requirements that were actually developed for internationally operating big banks. We are therefore calling for a “small and simple banking box” which provides for fewer and simpler rules for small, low-risk credit institutions”, said recently Georg Fahrenshon, President of the German Savings Banks Association (DSGV), in Brussels. To believe that there is a single regulatory approach that is suitable for all credit institutions has proven to be an error. The majority of credit institutions in the European Union do not pose any risk to financial stability. For this reason, Fahrenschon said, a significantly stripped-down regulatory framework should apply to these institutions under certain circumstances.

In the DSGV’s view, the criteria of the European Banking Authority (EBA) provide a good basis for defining the “small and simple banking box”. Institutions which, according to the EBA criteria, are not considered systemically relevant or otherwise systemically important should be included in the “small and simple box”. Fahrenschon: This definition is objective, transparent and has already been tested. It can therefore be applied to new legislation in the near future.”

The DSGV believes that the ongoing review of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV) already provides an opportunity to introduce the “small and simple banking box.” Reporting obligations, for instance, should be reduced, and a general disclosure obligation should be dispensed with in the “small and simple banking box”. 

In the implementation of international banking regulation in EU legislation, the “small and simple banking box” is expected to help in future to give due account to the strengths of the European banking market. In the European Union, there is a wide variety of credit institutions with different business models and different business strategies. The purpose is not to create a non-regulated space. Instead, the purpose of the DSGV’s “small and simple banking box” initiative is to create room for responsible business practices of retail banks by introducing reasonable and effective regulation. 

Fahrenschon: “We are calling for a new way of thinking in regulation. Anyone who wants to solve the “too-big-to-fail” problem must not create a “too-small-to-comply” problem. The “small and simple banking box” is designed to strengthen diversity in the European banking market. In this way, small and medium-sized credit institutions will be preserved as contact points for retail customers and small and medium-sized enterprises.”


>> See: German Savings Bank Association press release​

>> Learn more: ESBG position on Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV)​​




Capital Requirements Directive and Regulation; SME finance; Bank recovery and resolution; Proportionality; Regulation; Supervision; European Institutions