The European Commission organised on Thursday 28 May its first virtual Round Table (see EUROPE 12482/32) bringing together banking, insurance, business and consumer associations and representatives of European financial supervisory authorities to discuss how the industry can best support citizens and businesses throughout the pandemic.
“We need a collective and coherent European effort to provide relief to businesses and households”, said Commission Executive Vice-President Valdis Dombrovskis at the meeting, according to a speech published online.
Indeed, the Commission has noted wide divergences between countries as regards the implementation of exceptional banking measures. In some cases, all consumers and businesses concerned can benefit, while in others the eligibility criteria are strict and access to these measures can be very lengthy.
These difficulties were confirmed by the President of SMEunited, Alban Maggiar, at the meeting. “Procedures are seen as too complicated and burdensome, decisions take too long time, measures are not sufficient and some banks use support for SMEs to restructure their own portfolio”, he said, according to language published online.
In cases where bank loans are not supported by government programs, SMEs complain that loan applications are rejected too often or charged very high interest rates, he added.
In his speech, Mr Dombrovskis called the banks to heed the call to order, asking them to refrain from charging higher interest rates and additional fees in the future and to avoid excessive collateral requirements as far as possible.
At the end of April, the Commission proposed to temporarily lift certain banking prudential requirements to further facilitate lending (see EUROPE 12476/8). The capital that will be freed up by this prudential relief must be directed to businesses and households directly affected by the pandemic, he insisted.
For their part, the banks, also represented at the meeting by the European Banking Federation (EBF), stressed the economic and regulatory restrictions to which they are subject and all the measures they have already taken.
The decision, coordinated by the EBF, to waive high-income bonuses and suspend dividends would have freed up hundreds of billions of euros for loans to European citizens and businesses by keeping an additional €30 billion of capital of the highest quality in the system, according to the federation’s managing director Wim Mijs.
Banks have also abolished some fees, made some electronic transfers free of charge, increased daily limits for cash withdrawals and raised the limits for contactless payments, he said.
As proof of its willingness to cooperate, on Wednesday the EBF adopted a joint declaration with SMEunited on the importance of having an adequate, fast and smooth flow of credit to SMEs at a time when small European businesses are facing extraordinary challenges.
Also present were consumer organisations such as Finance Watch, BETTER FINANCE, AGE Europe and BEUC, which argued that EU borrowers in financial difficulty due to the pandemic should have the right to defer monthly repayments on their loans for at least 6 months.
The Commission wants to launch a reflection on pandemic risk coverage
Speaking this time to insurers, Mr Dombrovskis stressed the need to “strike a balance between providing as much support to businesses and households as possible, upholding contracts, and protecting the financial solidity of the insurance sector”.
According to a statement issued at the end of the meeting, the President of Insurance Europe, Andreas Brandstetter, assured that the priority of insurers remains the respect of the commitments made to their customers, so that today’s claims, but also those of tomorrow, can continue to be compensated.
As it does not have the characteristics of a natural disaster, pandemic risk is difficult to insure, according to insurance companies, and is poorly covered by traditional insurance schemes.
Again, the terms and conditions of insurance policies vary from country to country and from insurer to insurer. Some of them have to compensate small businesses, such as restaurants that had to close their doors because of the pandemic, while others are not entitled to any compensation, the Commission noted.
One thing is certain for Mr Dombrovskis: we will have to think about “how best the insurance sector can cover pandemic risks”. In some Member States, notably in France, the idea of setting up a pandemic insurance scheme is already under consideration (see EUROPE 12472/27). “The Commission is ready to engage fully in these discussions”, he said. (Original version in French by Marion Fontana)