The European Commission will call on the EU’s financial institutions and supervisors to take on more risk, according to a draft report, as Brussels steps up efforts to boost the competitiveness of the bloc’s banking sector.
A draft of the EU executive’s much-anticipated report on banking competitiveness, seen by Euractiv, states that revitalising Europe’s financial sector will require a “cultural shift” away from the current “zero-risk tolerance” of bank supervisors and regulators.
“Improving the competitiveness of the EU single market for banking can foster the competitiveness of the EU economy,” states the report, which is set to be officially released in July. “Yet, this also requires a cultural shift by all stakeholders in the banking market.”
“Regulators and supervisory authorities should focus on material risks that matter most for overall financial stability, avoiding a zero-risk tolerance as this could hinder banks in supporting the economic activity and investments necessary for Europe’s competitiveness,” it adds.
The draft report, which could still change in the final published version, comes as part of Brussels’ wider efforts to reinvigorate the EU’s banking sector by reducing companies’ regulatory burden.
It also comes amid repeated complaints by EU banks that current regulations are harming their ability to compete globally, as US President Donald Trump deregulates swathes of America’s financial system.
While emphasising that regulators and auditors “must not lower the bar of necessary checks and balances”, the draft report stresses that they nevertheless should strive to boost “trust and to establish collaborative relationships with the bank’s business functions they control”.
It also notes that “banks… must be willing to be part of this cultural shift”, including by “restraining themselves from a continuous demand for guidance” from regulators.
“Ultimately, this comprehensive alignment in risk culture will produce far better results than any legislative change,” the report adds. “It is our shared responsibility to get there.”
The report also comes amid repeated suggestions by Brussels that the regulatory framework established after the 2008 financial crisis should be revamped.
Maria Luís Albuquerque, EU finance commissioner, said at an event organised by Finance Watch in Brussels last week that while the “pendulum” had swung toward “taking too much risk” prior to 2008, it has since shifted “too far to the other side”.
“I think some recalibration might be in order, also to adjust to current times and current challenges,” she said, adding that “we really need to find the sweet spot between financial stability and risk-taking capacity”.
Many, however, are concerned about Brussels’ push to ease banking regulations. “18 years on from the largest financial crisis in living memory, it seems the prudential lessons are being lost,” Max Kretschmer, press officer at Finance Watch, wrote in an op-ed for Euractiv last month.
One banking official said the Commission’s draft report is “rather light on substance”, with the “few clear signals” including a new regulatory “regime” for smaller banks and potential regular “assessments” by the European Banking Authority of banks’ capital requirements.
But most of the proposals “remain so vague they could ultimately encompass almost anything in practice”, the official said, adding: “It suggests there will be no shortage of work for lobbyists.”
This article has been updated.
(bw)
Source:
www.euractiv.com