Stimulating economic growth and prosperity

The extent of the bureaucratic burden associated with banking regulation has now become so large that it has caused negative consequences for the overall economy. Legislators have since recognised that the complexity of the regulations has become a problem.

An obvious example is regulation relating to sustainability (ESG): it threatens to overwhelm, in particular, small and medium-sized businesses. In turn, investors are put off by the comprehensive catalogue of questions they have to answer before investing in a green asset.

As a result, the next German government must emphatically commit to fundamentally streamlining regulation, at both the national and European level.

• The first step would be to place a moratorium on new regulatory initiatives in the financial market sector. This must be accompanied by a thorough analysis of the effects of the rules on banks and the economy. The review must also take into account the many requirements from European financial supervisory authorities, which are responsible for a large majority of the regulatory burdens. 
• New rules must be strictly scrutinised to determine whether they really are necessary and consistent with existing requirements.
• The EU’s ESG regulatory framework should undergo a review of its effectiveness and practicability. The bureaucratic burden must be significantly reduced. 
• Legislators should create a practical and legally secure framework for adapting terms and conditions in continuing obligations (general terms and conditions, GTCs). This is particularly relevant when it comes to strengthening the legal certainty surrounding business transactions.

Competition policy is now being driven more than ever by regulation. There is already a regulatory gap with the US that puts German and European institutions at a disadvantage and results in unequal competitive conditions. This also applies to Basel capital requirements since it is unclear whether the new US administration intends to implement Basel III at all. While the EU is sticking to its guns and will introduce it from 1 January 2025, the UK has already responded by postponing its application until the start of 2026. In order to restore a level playing field, the following measures are needed:

• Politicians and regulators must carefully monitor developments in the US, particularly the implementation of Basel III, and already begin preparations to be able to respond accordingly. The Bank of England has already confirmed that the requirements will be implemented in such a way as to avoid increasing capital requirements. 
• The incoming German government must work at the EU level to ensure the implementation of Basel III is not seen as irreversible and that there are comparable competitive conditions for European banks.
• In addition, Germany’s financial centre should be seen as a key part of Germany as a business location. We can take our lead from other EU countries that are much more committed to the interests of their financial centres.

Germany and Europe are missing out on many opportunities for more investment and greater prosperity because the capital markets are small-scale and fragmented. In order to exploit this potential, we ultimately need standardised rules across the whole EU. One key component of European capital markets union is securitisation. Securitisations connect bank-based financing to the capital markets. Small and medium-sized businesses get access to the capital market, which they would not otherwise have.

The potential of the European securitisation market is not being fully utilised. The causes of this lie in Europe’s regulatory requirements.

We must:

• Reduce transaction costs on both the supply side as well as on the demand side. This is the only way to make securitisation accessible for a larger number of market participants. 
• This would require adopting a German securitisation act to remove current legal uncertainties and loopholes, and put Germany on a par with its European neighbours. Vital fine-tuning would include creating a special form of GmbH in company law, the Securitisation GmbH, and extending the exemption from the burden of double taxation to all securitisations.

In order to provide customers with enough low-cost loans, for example to finance the purchase of residential property, regulatory hurdles must be removed, especially in the current tense situation.

In terms of capital adequacy requirements, the parallel application of countercyclical and sectoral capital buffers doubly burdens banks when it comes to lending. The following special surcharges have applied since February 2022: 0.75 percent for the countercyclical capital buffer and 2 percent for the sectoral systemic risk buffer for real estate financing.

It is therefore important that:

• The countercyclical and sectoral capital buffers are removed so that banks can use their capital to issue more loans. 
• Additional burdens on lending should be avoided, such as the introduction of further macroprudential instruments.
• Old funds from the bank levy paid into the restructuring fund should be repaid to banks in order to strengthen their capital base. This would allow them to provide more loans for the economy. Alternatively, the work already started on a transformation fund could be continued.
• When implementing EU consumer credit directives, additional national rules (gold-plating) should be avoided.

The German Ministry of Finance has begun reforming private pension provision with the aim of creating a pension provision portfolio without mandatory contribution guarantees and without the need for lifelong annuitisation. This would allow individuals to invest easily and cost-effectively in a variety of profitable forms of investment. More widespread availability of financial education is key to ensuring greater acceptance of capital market-based private pension provision.

We are calling for:

• The government-funded private pension scheme to be reformed in 2025 based on the work carried out by the Federal Ministry of Finance to date. New (government) products are not required for this, a range of simple, easy-to-understand offers would suffice. Revising existing complicated products, such Riester or asset-building savings (VL-Sparen) is only the second-best solution.
• The new government should gear its approach to the promising activities recently undertaken on the topic of ‘financial education’. It is now a matter of presenting and then implementing a national financial education strategy as quickly as possible.

In the payments market, commercial banks are the key service providers for their customers in Germany: In 2023 alone, they settled, e.g. 7.3 billion bank transfers for 107 million current accounts. And the payments market continues to develop further as a result of digitalisation. At the same time, banks also play a key role in other digital developments. Digital competitiveness has a decisive influence over who is able to help shape the markets of the future.

It is therefore a matter of creating the right framework conditions:

• The introduction of a digital euro for consumers only makes sense if it creates added value for all participants and is legally secure. At the same time, the work being done on the wholesale digital euro should continue at pace.
• The General Data Protection Regulation should be interpreted consistently throughout Germany and further developed at EU level in order to meet the new requirements of the use of artificial intelligence.
• For reasons of legal certainty, a civil law framework should be created for crypto-assets.
• The legal conditions should be created to permit the use of digital alternatives to the current written form requirement.
• The government should expedite measures to introduce the nationwide land register database in Germany.
• There must be greater cooperation between the private and public sectors to identify cyber-threats at an early stage and be able to respond accordingly.

As a business and financial centre, it is important for Germany to create a competitive taxation framework. Banks must be enabled to conduct their business without competitive disadvantages over institutions in other countries, both within and outside the EU.

In concrete terms, this means:

• Reducing the tax burden on corporate profits to 25 percent. 
• Irregular restrictions on the recognition of operating expenses should be avoided, such as the ban on deducting operating expenses for contributions to the Single Resolution Fund (‘bank levy’). 
• Sales tax on the management of syndicated loans should also be scrapped.
• Real estate transfer tax should be waived for first-time purchases of land or residential property for owner occupiers.