Dear Mr Merlin, the Commission set-up an unprecedented action plan to relaunch the economy, both in terms of actions undertaken and potential funds available. Moreover, the co-legislators recently concluded the so-called CRR quick fix Banking package to facilitate lending to households and businesses in the EU so that priority can be given to recovery of the real economy. Do you see that DG FISMA could still take further actions?
The targeted changes to the bank prudential framework we put forward just two months ago in response to the crisis have already entered into application. They will enable banks to continue financing households and businesses throughout this difficult period. It is now important that the banking community makes use of these adjustments in the intended manner and ensures that credit is flowing into the real economy where urgently needed. Otherwise, without swift and responsible action, solvency issues could emerge quite quickly, exacerbating the economic downturn.
We are also considering targeted amendments to certain elements of EU securities markets regulation in order to enhance their role in supporting the recovery. What is more, the flagship initiatives of the Commission in the area of financial services are certainly key for a successful recovery. I am thinking of the further development of the Capital Markets Union, the completion of the Banking Union, the need for a sustainable recovery as well as our efforts to promote digital transformation in the financial industry and to strengthen the economic and financial sovereignty of the European Union.
The Commission work plan includes the publication by the end of 2020 of the legislative proposal to implement in the EU the outstanding elements of the Basel framework (aka Basel IV). The crisis triggered by the pandemic spread of Covid19 have in many ways changed political priorities. Will this impact your legislative proposal? Do you see more room to better reflect specific aspects of EU markets and banking sector?
The targeted adjustments that we have brought to bank prudential rules to cope with the exceptional circumstances of the COVID-19 pandemic do not undermine in any way our support to the post-financial crisis regulatory framework. The Commission remains committed to faithfully implement the Basel III agreement in the EU, taking into account European specificities and the need to preserve the diversity of the European banking sector. This final set of reforms tackles structural problems that remain relevant to complete a sound prudential framework for banks in the medium term.
That being said, it is inevitable that EU banks, even though they are much more resilient today than they were at the onset of the last financial crisis, will be adversely affected by the difficulties experienced by their clients and by the increased volatility in financial markets. The Commission will take into account the impact of the COVID-19 crisis on banks’ financial situation in the impact assessment that will accompany its proposal for the implementation of the final Basel III standards in the EU.
Particularly in the current environment co-operative banks continue to play their traditional role supporting territorial cohesion with their people-centred model and local anchor. Do you see that cooperative/retail banks will have to adjust their business model going forward?
The Commission aims to maintain a regulatory framework that promotes a stable, sustainable, diverse and integrated banking sector. Diversity means that banks of different sizes and with different business models can cater for a whole range of financing needs, from small loans SMEs, to more sophisticated financing solutions for multinational companies. Co-operative and retail banks have an important role to play in such a diverse EU banking landscape. I am therefore happy that they are well represented and actively participating in the development of best practices for relief measures offered to consumers and businesses in the context of the COVID-19 pandemic.
The challenges European banks are dealing with – for example improving efficiency, making the most of the digital transformation, incorporating sustainability in their business model and risk management practices– remain the same, and the current crisis has only made them more acute. To preserve the diversity of the EU banking sector and enable cooperative and retail banks to continue playing their role, the Commission endeavours to achieve a proportionate implementation of the final Basel III framework.