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These are the requests the Italian Banking
Association (ABI) and the German Banking Industry Committee (GBIC) put
forward in a document which calls on European institutions to adopt
significant first and second level regulatory measures to counter the
economic effects of Covid-19.
At a time when the economy is being severely impacted by the economic
effects of Covid-19, Italian and German banks have drawn up a package of
proposals to mitigate the risk that the European banking sector's
ability to fund the real economy will decrease in the short and medium
term. The outlined solutions mainly concern the crisis management of
banks subject to direct national oversight and the role for national
deposit guarantee schemes, the search for an approach to managing NPLs
that counteracts pro-cyclical effects, and a balanced implementation in
the EU of the Basel 3 finalization regulatory package.
“The new European prudential rules”, comments Giovanni Sabatini, General
Manager of the Italian Banking Association, “were conceived before the
pandemic, in an entirely different context from the one we are in today.
We need to continue to push within the European institutions for these
rules to be amended, considering exemptions or temporary suspensions of
the rules to avoid unintended pro-cyclical effects.”
“In order to further develop the existing framework of the Banking
Union, there is no need to create a new institutional setup. Instead,
strengthening the role for national deposit guarantee schemes also
within the second pillar of the Banking Union could deliver substantial
benefits”, notes Karl-Peter Schackmann-Fallis, Executive Board member of
the German Savings Banks Association, which currently chairs the GBIC.
ABI and GBIC point out that the regulatory framework on the management
of banking crises should take into account the principle of
proportionality and must be in line with the principle of subsidiarity.
In line with the Single Supervisory Mechanism, crisis management for
banks should also be based on a two-level structure: for banks subject
to resolution, the European resolution authority will intervene; for
territorial banks, the national resolution authority will intervene in
accordance with standardised rules. In this context, a harmonised
framework focused on the insolvency of European banks and a strengthened
role for the national deposit guarantee schemes could produce
advantages, reinforcing the Banking Union without altering the
institutional approach.
As regards the implementation of the Basel III rules, ABI and GBIC maintain that the current context requires a temporary suspension of the legislative process for implementing the new rules by the European Union, at least until the impact of the health crisis on the real economy and on the financial sector is fully understood. The objective is twofold: to avoid negative reactions on the capital markets and to avert the risk that a rushed implementation of the Basel III reform will restrict lending to businesses and households, thus hindering the recovery of the European economy.