On Thursday 27 March, Claudia Buch, Chair of the ECB’s Single Supervisory Mechanism (SSM), said that European prudential rules were not a handicap to the competitiveness of the banking sector.
“Supervision and capital requirements are not holding back growth”, said Ms Buch in response to a question from Eero Heinäluoma (S&D, Finnish) during a debate in the Committee on Economic and Monetary Affairs. In her view, with a CET1 ratio of 15.7% and a non-performing loan ratio of 2.3% in the third quarter of 2024, European banks are solid and have adapted well to a more restrictive monetary policy.
This situation allows the banking sector to continue financing the economy, according to Ms Buch, who believes that “there are no supply-side constraints” on credit.
Enikő Győri (PfE, Hungarian) wondered whether the European Union should evolve its regulatory approach, if the United States and the United Kingdom do not apply the ‘Basel III’ standards. “We’re implementing ‘Basel III’ in Europe. All the feedback we get is that it does not put their business at risk”, said Ms Buch. She said she was convinced that applying the ‘Basel III’ standards sends “a very positive signal (...) to the rest of the world”, as other jurisdictions have no interest in weakening the regulatory framework.
Simplification. In addition, the Chair of the SSM reiterated her warning against any move towards regulatory simplification that would lead to a weakening of prudential regulation (see EUROPE 13526/20). “Simplification cannot come at the expense of resilience” or appropriate risk management, she stated. To Giovanni Crosetto (ECR, Italian), she pointed out that banks, which have invested heavily in their information systems, needed company data to assess their exposure to environmental risks.
Ms Buch did, however, see scope for improving EU law in three areas: “supervision, reporting and regulation”.
In terms of supervision, the SSM Board, which directly supervises banking groups within the banking union, will have to focus more on risk. It is also possible to reduce the costs associated with reporting by harmonising processes and strengthening the sharing of information, said Ms Buch. Without providing any concrete examples, she did not rule out the possibility of modifying the regulatory framework, provided that any changes were guided by sound evidence and a cost-benefit analysis.
Digital euro. Finally, asked a question by Jonás Fernández (S&D, Spanish) on the issue of stable crypto-currencies promoted in the United States by the Trump administration (see EUROPE 13600/14), the Chair of the SSM Board advocated international cooperation in this market segment, which could entail systemic risks. Even if the direct exposure of European banks to these financial products remains “limited”, the lack of regulation in other jurisdictions may impose “competitive pressure” on the EU, she noted. (Original version in French by Mathieu Bion)