27 October 2021

Opening remarks by Commissioner Mairead McGuinness at the press conference on the Banking Package 2021

The EU has put in a lot of work over the past decade in response to the global financial crisis to better regulate banks.

So we have fixed many of the issues in the pre-crisis rules.

Those reforms mean that today our banks are much better capitalised, they have enough liquidity and they are not excessively leveraged.

So we are in a much better place than we were ten years ago.

But the job is not yet done.

So today we're putting forward a proposal to implement the final part of the reforms agreed at international level, as Valdis has just outlined.

And that work takes into account that we are still in quite a difficult economic environment.

Banks in Europe have much more capital than they did before the global financial crisis.

But they still face challenges around profitability, and we are still in the early stages of the recovery from the COVID-19 crisis.

So let me outline some of the details in today's proposal.

Firstly, on the implementation of Basel III.

Here we are staying faithful to the agreement, while using the flexibility within it and certain targeted adjustments to reflect the specific features of the EU economy and banking sector.

For example, we're reflecting the significant economic contribution of SMEs.

And EU banks' long-term equity holdings will not be considered speculative investments.

The proposal aims to ensure that banks' internal models do not underestimate risk.

Capital ratios across banks will be more reliable and comparable, strengthening the resilience of the sector overall.

We are also giving banks time to adapt to the new rules.

And we are making the rules more proportional.

Our package reduces compliance costs, in particular for smaller banks, without weakening prudential standards.

So overall, we are addressing the flaws that remain in prudential rules, while avoiding a significant increase in the overall capital requirements of our banks.

On sustainability, the second part of the package.

The transition to climate neutrality entails risks that banks will need to manage for the sake of financial stability.

In our July Sustainable Finance Strategy, we highlighted the need to integrate ESG risks into the EU prudential framework.

And today's package takes the next step in implementing that strategy.

We are introducing specific requirements for banks to implement the systematic management of ESG risks.

And we are also giving supervisors the tools they need to enforce these requirements.

We are also asking the EBA to accelerate its work on possible prudential rules on green or brown assets.

A third element of today's package is giving supervisors that oversee EU banks more powers.

We are harmonising a “fit and proper” set of rules for supervisors to check whether senior management has the right skills and knowledge to manage a bank.

In response to Wirecard we are making two specific improvements:

• first, clearer rules to deal with fintech groups that engage in banking activities;
• and second, minimum requirements on supervisory independence, for example to avoid potential conflicts of interest.

And we are addressing the issue of third-country bank branches in the European Union.

Here we want a level playing field for EU banks and international banks operating in the EU.

The EBA highlighted recently that third-country branches in the EU carry out a significant volume of activities in the EU market and are relevant for financial stability.

Our proposal puts forward minimum standards for the regulation and supervision of third country branches, building on national rules already in place.

And this is similar to the rules that non-EU countries have for branches that operate in their territories.

In closing, today we are finishing the job that we started over a decade ago.

We have put in a lot of time and effort to fix the flaws we identified back then.

We want a robust, competitive and sustainable banking system.

And we believe that today's proposal will help deliver that.

But we also need to look towards the future.

European banking could look very different in ten years' time.

Digitalisation could lead to fundamental changes in the financial system.

Climate change means that we need to transform the way we live, work and do business.

Finishing the job on the reforms prompted by the global financial crisis will help us concentrate on preparing for the future.

Commission

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