ECB consultation on banking sector consolidation: EBF response

02 October 2020

The EBF fully supports the intention of the ECB to achieve clarification and transparency on its supervisory approach to notifications of proposed acquisitions and applications for permission for a business combination.

As the ECB rightfully indicates, decisions for consolidation belong to market participants. Nevertheless, the ensuing supervisory examination is a crucial step in the success of such transactions. The publication of an ECB guide should add clarity to the process. However, it will be important for the ECB to not just clarify the process, but we strongly encourage the ECB to actively facilitate mergers.

In addition, we would like to emphasize the following key points of the EBF response:

• The EBF supports the ECB in coordinating with other authorities during the process of a banking merger. As an example, the EBF encourages to coordinate with the Single Resolution Board to establish transitional arrangements of the minimum requirement for own funds and eligible liabilities (MREL) and total loss-absorbing capacity (TLAC), which take into account the merits of consolidation for the combined entity.
• The challenges that are currently being faced by banks are more structural and need to be addressed through changes in regulation. We need to reduce regulatory barriers, which will requires a broader approach to the topic, which will need action from lawmakers. Those include, but are not limited to:
  • more harmonization in anti-money laundering (AML) and tax regimes is needed
  • addressing problems arising from regulation that goes beyond global standards, such as the regulatory treatment of external MREL
  • Removal of obstacles to the free flow of capital and liquidity

Full response

© EBF