26 November 2019

Financial Times: Brussels eyes easing bank rules to spur green lending

The plan underlines the environmental ambitions of the next European Commission, the EU’s executive, which is expected to be voted into office on Wednesday for a five-year term.

But it is likely to stoke a battle with regulators at the European Central Bank, where officials have warned against tampering with rules designed to make bank lending less risky.

Valdis Dombrovskis, a vice-president of the commission, told the Financial Times that he wanted to examine a cut to the capital charges imposed on banks’ climate-friendly lending.

He said the initiative would encourage banks to finance energy-efficient homes, zero-emissions transport and other green investment by reducing the amount of capital they would have to set aside against such lending. A “green supporting factor” for bank lending is “something we need to explore”, Mr Dombrovskis said in an interview.

Ursula von der Leyen, the incoming commission president, is prioritising plans to curb EU carbon emissions as part of a so-called green new deal. The European Parliament is due to vote this week on new climate targets.

Mr Dombrovskis, who heads Brussels’ policymaking on financial regulation, will have expanded responsibilities in the incoming commission, which will start work on December 1. These include being in charge of plans to mobilise €1tn of climate-related investment over the next decade.

His plan for capital charges — which was briefly floated by Brussels two years ago — faces opposition from banking supervisors. Andrea Enria, the head of the ECB’s bank supervision arm, insisted last week that financial institutions’ capital requirements should be based on the level of risk they take and should not be altered to pursue other objectives. [...]

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