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The arguments in favour of greater proportionality are myriad. And, as far as banking supervisors are concerned, too, there are strong arguments as to why greater regulatory proportionality is needed.
Now that the financial crisis is over, there are stricter rules and a common European approach to supervision in the form of Basel III and the banking union. These rules are mainly geared towards large banks with international ties, which is not exactly surprising considering these banks were the ones at the epicentre of the crisis.
In Europe, however, the international standards since Basel I have been applied to all banks. In this sense, there is a single rulebook for the EU that is designed to guarantee a level playing field. That's one side - the bright side - of the coin. On the flip side - the tarnished side, so to speak - this unity has come at much too a high cost to smaller and medium-sized institutions ever since Basel II.
The Basel III reforms have made it even harder for these banks, as the rules are getting more and more complicated and explicit, and the list just keeps getting longer. This is increasing the compliance workload - that is, the effort associated with meeting the requirements as well as demonstrating that they have been met. In fact, these rules are well suited to the lion's share of increasingly complicated banking business - but the reality is that not all banks and savings banks have as complex a set-up as is assumed under the new framework.
After almost a decade of regulatory reform, the international community of banking supervisors has been asking itself a number of questions for some time now. In which areas are reforms counterproductive? Where are they disproportionate? To come to the point straight away, we can only answer these questions if we start by looking at the excessive strain placed on smaller and less complex institutions.
The euro area is experiencing impressive economic growth again for the first time in a decade. A differentiated banking system is a key pillar of the economy - and Mr Dombret is convinced that this diversity makes the economy more dynamic and more resilient.
He says:
“And we must be careful not to burden this differentiated banking system unnecessarily through regulation. For us, as supervisors and regulators, this means addressing parts of the banking regulation that have become overly complex.
“We should not place any disproportionate obstacles in the way of small institutions and savings banks. It is now up to the European Parliament, the EU Council of Ministers and the European Commission to pave the way for substantial improvements.”