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If Europe is to carry on moving forward with its ambitious sustainable growth agenda, it will be essential to consider the completion of Banking Union and to reinvigorate Capital Markets Union. At the same time, the EU needs to carefully calibrate the range of EU and international – ‘Basel4’ – regulatory measures that are nearly final.
The Board approved the 2019 EBF strategy, ‘Building trust in an age of disruption’. The next year will see many changes and transitions, including the European elections that will determine the EU policy agenda for 2019-2024, and leadership changes at the EU’s financial regulation and supervision bodies.
On sustainable finance, the Board noted that swift steps are being taken at the EU level, with the banking sector – including the EBF – being constructively engaged in these discussions. Banks play an essential and pivotal role in financing the global transition towards a sustainable low-carbon economy and recognize this as part of their purpose and role in society.
Addressing EU Risk Reduction Measures, the Board urged EU co-legislators to get the package right by carefully considering the threshold level under the Minimum Requirement for own funds and Eligible Liabilities (MREL). Setting a threshold level that is too high will harm the capacity of banks to finance. The EBF also calls for a balanced approach to the prudential backstop currently considered for non-performing exposures arising from new loans. An adequate treatment of software in the prudential framework is necessary to support innovation and strengthen the competitiveness of the banking sector, and thereby enable banks to foster growth.
While banks across Europe continue to implement their Brexit contingency plans, board members expressed their hopes that the recent agreement reached on the United Kingdom’s withdrawal from the EU will help avoid a hard Brexit cliff-edge scenario. Significant Brexit risks are to be considered where it concerns cleared and uncleared derivatives. Regardless the final outcome of the Brexit processes the EBF remains hopeful that all relevant public actions will be taken in order to avoid negative consequences for the users of these markets. The EBF stands ready to contribute technical recommendations to help avoid undue disruptions. In this context, the Board also underlined the importance of maintaining a level playing field between banks and other actors in financial services such as investment firms.