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EC consultation brings calls to ease tougher banking rules
[LONDON] Banks, fund managers and company treasurers have called on the European Union to relax new capital and transparency rules imposed on banks and financial market players following the 2008 financial crisis in order to try and get more cash flowing into the still sluggish economy.
The financial industry, along with some policymakers, have said rules forged in the heat of the crisis has led to unintended consequences that need fixing, prompting the European Commission to launch a public consultation which has just closed.
A focus is a complex set of requirements for banks to hold far more capital to cover loans and trades, which they say has made trading and services uneconomic in some cases.
The European Banking Federation (EBF) a trade body, said it was a good time for the EU to revise the bloc's rules and offered "concrete and proactive solutions" to 55 issues in its 72-page submission. "Unnecessary regulatory burdens exist. Now, more than seven years after the crisis, we feel it is a natural moment to calibrate and to fine-tune the new regulatory framework," EBF Chief Executive Wim Mijs said. "Addressing these is necessary for the competitiveness of our financial system and for our businesses, growth and prosperity in Europe," Mijs said.
It stops short of calling for sensitive rules like the bloc's cap on banker bonuses to be ditched, but says requirements to defer portions of a bonus over several years should be softened in some cases.
But banks were not alone in wanting some changes to the regulatory regime.
The European Fund and Asset Management Association (EFAMA) said in its submission it wanted "regulatory stability" - while presenting 40 examples of "existing barriers, inconsistencies and duplications" that needed tackling. "There are currently many examples of fundamental directives affecting our industry where it is extremely difficult to be prepared within the prescribed timetables," EFAMA President, Alexander Schindler, said.
The Alternative Investment Management Association, which represents hedge funds, also said changes were needed to encourage more market-based financing for companies.
And the European Association of Corporate Treasurers said some of the new rules make it harder for banks to help companies fund themselves and manage risks.
Banks were choosier about who they do business with, leaving companies with "unequal access" to banking services, EACT said.
A number of companies find their access to credit facilities or loans reduced or subject to tighter conditions due to the tougher capital and liquidity rules imposed on banks, it said.
Also, new rules requiring companies to report derivatives transactions are costly and not justified in terms of aiding financial stability, EACT added. "We therefore call upon the Commission to assess the appropriateness and proportionality of some of these measures and to relax the provisions that are harmful to the real economy," EACT Chair Jean-Marc Servat said.
EU financial services chief Jonathan Hill launched the"better regulation" consultation and has powers to propose changes to the rules, which would require approval from EU states and the European Parliament and could take several years. "We'll now go through the hundreds of detailed pieces of evidence we have received," Hill said on Monday.