20 July 2011

CRD IV: A major step forwards but not without its risks, says AFME

Michael Lever, managing director at the Association for Financial Markets in Europe (AFME) warned of the risks of the impact of CRD IV being considered in isolation from the many other pieces of regulation currently being introduced.

The publication of the final text of the fourth Capital Requirements Directive (CRD IV) will mark a significant step in the move towards a more durable European financial system, strongly supporting economic growth, Europe's leading financial markets representatives said today.

Speaking ahead of the expected publication of CRD IV today by the European Commission, Michael Lever, managing director and head of prudential regulation at the Association for Financial Markets in Europe (AFME), said: “CRD IV is broadly welcomed by the industry as reinforcing the significant changes that have already been made to improve the banks' resilience, risk management and market discipline. As one of the major pieces of financial reform for Europe, its impact on both the financial sector itself and the wider economy will be felt for many years to come”.

“We anticipate that CRD IV will also herald moves towards greater harmonisation of financial regulation among MemberSstates. Done well, this should contribute strongly to deepening integration, reinforcing financial stability and supporting sustainable economic growth.”

Michael Lever added: “While welcoming the CRD IV package, we continue to have concerns about a number of important aspects of the underlying proposals. We hope that the coming legislative process and the observation and transition periods will be used to address these elements. It is important to understand better the overall effect on the economy of the large number of regulatory reforms that are currently underway or envisaged. We must be sure that the cumulative effect of these measures, at a time when Europe's economies are fragile, does not stifle economic recovery“.

“We urge the Commission to monitor the impact of these and other rules very closely during their implementation phases, and to be prepared to reconsider some of its requirements if it becomes clear that they are having a damaging effect on the economies of Member States. On the wider stage, we look to regulators globally to ensure that all requirements are implemented consistently and in a co‐ordinated fashion so that a level playing field is maintained. This will help secure the flow of finance for Europe and bring confidence that our banks can continue to be able to play their part in supporting recovery and growth."

Press release

© AFME