On 27 February 2014 DZ Bank, a German Member of the European Association of Co-operative Banks (EACB), published a study titled “Banking Union as a Cost Driver”, estimating the complementary cost of the Banking Union for credit institutions in Germany.
The study predicts a strong increase in compliance costs for German banks, starting in 2015. It is estimated that the cost pressure for the sector could amount to about €9.7 to 10.6 billion per annum in Germany alone. Such a figure would match or even exceed the annual average profit of the whole German banking sector.
The cost drivers identified in the study include increased contributions to the resolution and deposit guarantee funds, costs of preparing recovery and resolution plans, supervisory fees under the SSM and other costs of the new supervision (including IT changes and training), as well as the increased costs of funding. The latter will result from the increased risk of investments from shareholders, creditors and non-covered depositors under the new bail-in regime.
With regard to the significant financial burden, the study recommends not to shorten the period for the building up of the resolution funds. Otherwise there would be a danger that the cost of the banking union would come to its peak during the period when banks have to build up own funds and provide loans to the real economy.
To access the full study, please click here.