On Tuesday 19 June, the committee on economic and monetary affairs of the European Parliament reached its negotiating position with the Council of the EU on the package aiming to reduce risks in the European banking system, for instance by building the TLAC buffer into EU law.
“We have today sent a strong signal for greater financial stability and tailor-made regulatory requirements for small and low-risk banks”, said Peter Simon (S&D, Germany), one of Parliament's rapporteurs.
According to a parliamentary expert, the forthcoming negotiations with the Council of the EU, which struggled to reach an agreement in principle on this dossier in May (see EUROPE 12027), are nonetheless likely to be complicated. The expert explained that the Council cannot get on board with Parliament's view that the level of subordinated financial instruments that can be mobilised in the event of resolution should not be higher than the requirements applicable to the TLAC.
The MEPs have limited the provisions on subordinated instruments, to apply from 2024 with an interim target in 2022, to major financial institutions (G-SIIs) only, whereas the Council of the EU has extended the scope of application to banks managing more than €100 billion in assets.
The parliamentary committee set at 3% the maximum leverage indebtedness ratio for major groups and readjusted the NSFR ratio, which aims to ensure that a bank holds enough stable assets over a year to be able to ride out any down-turn in the economic situation.
Additionally, for cross-border financial institutions, the MEPs support the idea of waivers for equity and liquidity, but limit these to 25% of minimum bank capital requirements.
The Greens/EFA group, which tabled an alternative compromise proposal alongside the ECR group (see EUROPE 12043), criticised the Parliamentary committee's stance, as it felt that it is weaker than that of the Council when it comes to major European banks.
The rules on leverage ratios and NSFR contain many differences compared to the international standards of the Basel Committee, Sven Giegold (Greens/EFA, Germany) points out. However, he welcomed the fact that Parliament has made the case for exchanges of information on risks of money laundering between the competent supervisors and national authorities to be made compulsory.
Anne Sander (EPP, France), on the other hand, argues against any over-transposition of international standards, which would bring about a competition distortion between the European and American banking sectors.
WWF has welcomed the fact that the MEPs have called for the European Banking Authority to report on the possibility of requiring banks to measure financial risks linked to investments in non-sustainable assets, such as fossil energies. This would allow such investments to be made more expensive, it considers. (Original version in French by Mathieu Bion)