GBIC on ECB plans for more efficient regulation and supervision

The German Banking Industry Committee (GBIC) welcomes the initiatives of the European Central Bank (ECB) to simplify regulation under the leadership of Vice-President Luis de Guindos and of the Single Supervisory Mechanism (SSM) to reform European banking supervision.

“The ECB has recognised that the current regulatory framework endangers the competitiveness of European banks. The ECB’s extensive proposals should now be taken up by the European Commission as a matter of urgency. We need fast results in Europe,” said Heiner Herkenhoff, CEO of the Association of German Banks, this year’s GBIC coordinator.

The proposals of the ECB’s High-Level Task Force on Simplification relating to the regulatory framework address key topics, such as a more streamlined capital framework, a greater degree of proportionality, especially for small banks, and amendments to reporting and disclosure requirements. In the opinion of the GBIC, discussions on improving the quality of capital and its components must be conducted in a sound manner. It is vital that the ECB’s proposals do not lead to additional burdens (e.g. in the case of AT1) for the institutions. We welcome the ECB’s plans to relieve the burdens on smaller institutions. However, they do not go far enough and are still too vague. More extensive reforms are needed here. The proposals on reporting address some key demands of the banking industry.

The plans to reform banking supervision address a number of important issues and are a step in the right direction. That efficiency gains are to benefit both the authorities and the institutions is welcomed by the GBIC. It is also positive that the SSM is reviewing not only its processes but also its own guidelines. The SSM should review these thoroughly and ensure that they do not result in a tightening of statutory requirements.

“The extensive considerations of the ECB and the SSM provide important stimuli. However, the question remains as to whether they will be sufficient, especially considering the regulatory relief measures in the US and the UK. We are calling on the European Commission to be more decisive in its report on the competitiveness of the banking sector,” said Herkenhoff.

The German Banking Industry Committee recently published a discussion paper, which outlined how efficient and, at the same time, stable regulation could guarantee scope for more growth and investment in a sovereign Europe.