The European Parliament's Economic and Monetary Affairs Committee began voting on Monday 8 June on the proposal for a regulation to temporarily ease certain prudential requirements (CRR ‘quick fix') in order to facilitate the granting of bank loans to the economy crippled by Covid-19 (see EUROPE 12489/18).
Agreed at the weekend by a majority of the committee's coordinators, the MEPs' position, which will be finalised on Tuesday, broadly takes up the Commission's original proposal (see EUROPE 12476/8). It should promote the adoption of these rules at the end of June, in co-decision with the EU Council, without the need for inter-institutional negotiations.
The provisional application of IFRS 9, which introduces a loan impairment model based on expected rather than actual losses (see EUROPE 11892/8), will thus be extended until the end of 2024. This measure will give banks more time to increase their capital levels related to bank loans that become non-performing in 2020 and 2021.
In addition, global systemically important insurers (G-SIIs) will be required to apply the leverage ratio buffer in January 2023 and not early 2022. And loans that become non-performing loans (NPLs), but which also benefit from a public guarantee granted in response to the pandemic, will be given preferential treatment with regard to the minimum capital adequacy requirement (NPL backstop).
"By adjusting rules with a pro-cyclical effect and empowering supervisors to react fast to highly volatile financial markets, we can cushion some of the negative economic effects of the Covid-19 pandemic", said Jonás Fernández (S&D, Spain), rapporteur on the dossier, in a statement. According to him, banks, which are better capitalised today than they were during the 2008 financial crisis, must be able to benefit from a "breathing space" to lend more to the economy.
Conditionality. As with state aid, the political debate focused on the conditions to be imposed on the banking sector in exchange for this regulatory relief, including the imposition of a ban on distributing dividends to shareholders of beneficiary banks, as called for by the Greens/EFA and GUE/NGL Groups.
The European legislator will not in the end go as far as a regulatory measure of uniform application. In a recital, MEPs call on national banking supervisors to "make full use" of the relevant recommendations already made by the European Banking Authority and the ECB, as the single supervisor in the euro area.
The future regulation will require the Commission to report on the appropriateness of imposing restrictions on the distribution of dividends and bonuses in the event of severe financial turbulence.
This is the maximum that was possible under the current circumstances, commented a parliamentary source on Monday, pointing out opposition from the EPP group, the European Commission and the Council.
"In order to ensure that capital relief granted to banks does not end up in the pockets of investors but is used to lend to the real economy, we have introduced a clear mandate for the competent supervisors to impose binding bans on paying out dividends and share buy backs", said Mr Jonás Fernández.
The Greens/EFA Group is of the opinion that these measures do not go far enough. Its negotiator, German Sven Giegold, believes that a ban on dividend payments should be in place until the end of 2021, while the ECB's recommendations in this area run until the end of October 2020. And this prohibition should also cover instruments such as contingent convertible bonds (CoCo bonds), which allow their holders to continue to earn high interest at the present time. (Original version in French by Mathieu Bion)