European bankers insisted on the necessity to maintain a proper level-playing field, in particular in the implementation of international measures in different jurisdictions. “Different implementations would result in competitive distortions, to the detriment of our economy” commented Alessandro Profumo, President of the EBF.
The European banking industry accepts the need for stronger capital and liquidity regimes and practices, and reiterates its readiness to comply with the new demanding capital levels. Nevertheless, the presidents of the national banking associations in Europe repeated their concern over the possible consequences of the capital and liquidity demands on the availability and cost of lending. They stressed again that in Europe 75% of the financing needs of households and businesses are provided by banks, as compared to a mere 25% in the US, thus putting Europe in a very different competitive situation.
Though they support the need for reforms, EBF members strongly oppose more capital surcharges for systemically important financial institutions (SIFIs). While strengthening stability is indeed a priority, there are different means of meeting the concerns of regulators about systemic risks, such as appropriate crisis resolution mechanisms, enhanced supervision for SIFIs and improvements in the structure of the over-the-counter derivatives markets. It is also crucial that the constraints of the new Basel agreement are not increased by different measures such as a further capital buffer, additional liquidity requirements or the imposition of bank taxes and levies. They also point out that clearly, the uncertainty over the future regulatory environment banks will operate in is creating a new risk in itself for the financial markets.
European bankers also raised concern about the cost of Basel III measures on trade finance and export credit, which could be made much more expensive as a result of the global banking rules, and thus drive smaller banks out of the market as well as prompt larger ones to reduce lending, a view supported by many economists.
EBF Board members stressed that a cumulative impact assessment of all measures – capital, liquidity, levies, taxes and other issues - had yet to be carried out, to allow all actors (industry and policy-makers) to fully grasp the broad impact of the full range of measures. “World leaders are going to finalise the most comprehensive reforms ever in the financial sector, and nobody knows what their consequences will be,” added Profumo. “We therefore urge G20 leaders to carefully assess each measure in the observation period, their overall impact and interaction”
© EBF
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