The first exchange of views at ministerial level on the legislative package (CRD-CRR) aiming to tighten up the banking prudential rules provided certain member states with the opportunity to raise a number of sizeable issues, such as a lack of ambition in the measures to reduce risks and an imbalance between the competencies of the home/host countries, on Tuesday 6 December (see EUROPE 11674).
For instance, several delegations said that the legislative package does not go far enough in reducing financial risks. "It is important that the package really delivers about risk reduction", said the Dutch finance minister, Jeroen Dijsselbloem. He pointed out that the Commission had not set higher requirements in terms of the leverage ratio, which it has proposed at a level of 3%. "In the Netherlands, we've set the ratio at 4%", he commented. He went on to ask what could be done to limit the national options and leeway that are undermining the harmonisation of the European rules. The German minister, Wolfgang Schäuble, reiterated that the TLAC buffer of own funds for the major international systemic banks, agreed upon at G20 level, was a minimum. Ultimately, the Commission could have shown more ambition by setting higher requirements. Schäuble also regretted the fact that no measure had been tabled to deal with sovereign risk, as the European legislation does not at this stage provide for any capital requirements in this area.
In Germany's view, it is impossible, at this stage, to move forward on the sharing of the financial risks when there is no ambitious legislative package on reducing these risks. In response to this, other countries, such as Spain, Ireland and Italy, said that work should move forward in parallel on the finalisation of Banking Union in the Eurozone in line with the roadmap adopted by the Ecofin Council in June (see EUROPE 11575).
The 'home/host' country issue rears its head once again
Several delegations – 12 countries, according to the Luxembourg finance minister, Pierre Gramegna criticised a provision of the legislative package which makes the application of the banking prudential rules more flexible at an individual level. This provision, which is logical now that the ECB has been established as single supervisor within the Banking Union in the Eurozone, suggests that the same entity supervising the headquarters of a banking group as well as its subsidiaries established in other member states waive certain requirements for own funds and liquidity for the subsidiaries, as long as the home country provides the host countries with certain guarantees. This provision would remain optional for countries outside Banking Union.
Following the debate on the level of capital buffers, the home/host dynamic has resurfaced: the question is where the capital and liquidity ratios should be set, Gramegna told the press. With more than 140 banks in Luxembourg, including many subsidiaries, it is important to us that a guarantee is also met for subsidiaries, the minister added, going on to stress that financial stability is at stake.
During the debate, Belgium, Slovenia, Bulgaria, the Czech Republic, Latvia and Romania spoke along the same lines.
With this provision, we are giving the host country greater discretion as regards supervision, acknowledged the Commissioner for Financial Services, Valdis Dombrovskis. He stressed that the aim of this provision was to consider a Banking Union in the Eurozone as a single jurisdiction. He went on to clarify that the "full amount of the waived requirement [would be guaranteed and] collateralised [under] the law of the host member state". (Original version in French by Mathieu Bion with Élodie Lamer)