25 January 2012

ECON debate on the draft report on CRD IV/CRR

Karas warned of regulatory divergence between the US and the EU. This possible divergence will create a competitive disadvantage for European banks. He encouraged the EC to carry out the necessary analysis on this probable transatlantic divergence. He also said that maximum harmonisation is the right approach.

Karas wants EBA to be more involved in the current CRD IV/CRR debate in order to guarantee that they can work in parallel with the EU institutions. Karas also said that CRD IV/CRR need to find the right balance on the risk weight formulas, mainly on the SMEs case and on the sovereign debt.

On the liquidity requirement, Karas said that the current wording is unclear and he wants to introduce biding liquidity ratios by 2015. He said that CRD IV/CRR should not avoid economic growth and therefore corporates’ hedging needs should be considered.

Shadow rapporteur, Sharon Bowles (ALDE, UK), emphasised that the zero risk weight for sovereign debt is disproportionate. This should be addressed as well as the risk weight for trade finance. Bowles believes that the specificities of the European banking sector should be taken into account and the principle of proportionality respected. She questioned maximum harmonisation because it may not be possible to implement CRD IV/CRR in the same way in every single Member State. Concerning the US, she does not like the idea of the EU waiting until the US has proposed specific legislation covering the Basel III principles. Bowles emphasised that there should be consistency between EMIR and CRD IV/CRR. She supported the corporates exemption from the CVA charges.

Shadow rapporteur, Udo Bullmann (S&D, DE), agreed with the rapporteur in nearly everything. He stressed that the EP should be ambitious in reforming the banking system. Moreover, CRD IV/CRR should avoid a situation where SMEs will no longer be able to invest. On the risk weight of the sovereign debt, Bullmann said that policymakers should take into account the link between CRD IV/CRR and the CRAs regulation.

Shadow rapporteur, Vicky Ford (ECR, UK), agreed with the corporates’ need to hedge, however, she believes that the full exemption from the CVA model may be going too far because there might be some risks on the corporates’ derivatives transactions. She disagrees with the maximum harmonisation proposed by Karas because it is not the right approach for the differences in the European banking system.

Shadow rapporteur, Philippe Lamberts (Greens, BE), said that policymakers need to introduce a way to separate banking business in Europe (similar to the Volker rules in the US). Lamberts also said that Significantly Important Financial Institutions (SIFIs) need to be covered under CRD IV/CRR. He thinks that the EBA needs more powers.

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