On Thursday 8 February, the Greens/EFA group at the European Parliament published its amendments to the legislative proposals of the ‘banking risk reduction’ package, calling for the credential requirements to be relaxed for smaller banks.
“In the forthcoming negotiations, we will recommend a tangible simplification for smaller banks, without damaging financial stability. Inversely, we will also insist on strict rules for institutions of systemic importance”, Germany’s Sven Giegold (Greens/EFA) said in a press release in German (our translation).
Readers may recall that this package, which was presented by the European Commission in 2016 (see EUROPE 11674), includes such elements as a proposal to bring in more proportionality in the banking prudential rules (CRR/CRD IV) for small banks deemed non-complex.
In particular, the Greens propose modifying the criteria that institutions must meet in order to qualify for simplifications and exemptions. For instance, they suggest modifying the definition of ‘small institution’ proposed by the Commission (article 430 a (4) CRR II) by: - increasing the threshold of the value of assets to €5 billion, as called for by the European Banking Authority (EBA), instead of the threshold of €1.5 billion set by the Commission; - adding higher capital and leveraging requirements (with ratios above 15% and 6% respectively), plus qualitative criteria in accordance with a non-complex business model.
They also call for proportionality to be reinforced in the reporting fields, proposing that the EBA draft a common declaration framework, including statistical data, as well as reducing the frequency of reports for data which rarely change. The Greens also wish to remove certain disclosure requirements for smaller, unlisted banks.
The Green MEPs also consider that the “leverage and liquidity rules must never be weaker in the EU than what is proposed at international level”.
They have tabled amendments where the “Commission proposal deviates in the detailed calculations from the proposals of the Basel Committee purely to please banks”. For instance, they propose more conservative factors to penalise banks that finance less liquid assets, such as derivative products, using unstable and short-term financing.
Opposition to the ‘Green Supporting Factor’. It is also worth noting that the Greens oppose the proposal tabled by rapporteur Peter Simon (S&D, Germany), for reduced capital requirements for banks in order to stimulate green investments and loans (‘Green Supporting Factor’) - a proposal that has found favour with the Commission (see EUROPE 11924).
They believe that “encouraging investment in particular sectors of the economy is the job of economic and fiscal policy”. Prudential policy, for its own part, should focus solely on the stability of the banking sector, according to their approach. Instead, they recommend that banks be required to take stock of the environmental, social and governance risks associated with their investments and that the public be kept informed of how they do this.
The political groups had until the end of January to table their amendments, ahead of their examination by Parliament's committee on economic and monetary affairs on 22 February. The Green's detailed proposals can be consulted at the following address: http://bit.ly/2ErW4Vc . (Original version in French by Marion Fontana)