In the agreement, the threshold of EUR 5 billion for the balance sheet total to define “small and non-complex” institutions – albeit combined with other criteria to be met – goes far beyond the EU Commission’s original proposal for a limit of EUR 1.5 billion. The agreement has therefore set the right course for more proportionality in banking regulation. In the GBIC’s view, the specific proposals made to ease the burden on smaller institutions constitute a good approach to build on in the future.
The GBIC also welcomes the clear commitment to SME financing as reflected by the confirmation of the SME supporting factor and the increase in the lending threshold per borrower from EUR 1.5 million to EUR 2.5 million.
In addition, the package agreement helps to make an important cornerstone of Germany’s retirement pension products more sustainable – the fund-linked Riester pension. The GBIC welcomes this initiative, which will lead to more planning reliability in the institutions.
In future, equity instruments in subsidiary institutions will be expressly recognised as common equity tier-1 capital, even if profit-and-loss transfer agreements have been concluded. This will ensure that credit institutions can continue to be part of tax groups without having to fear disadvantages under banking supervision law.
Contrary to what the GBIC had requested, the new market risk rules (FRTB – Financial Review of the Trading Book) have now already been integrated within the European Union although negotiations are still ongoing at the Basel level. The GBIC takes a very critical view of the reporting obligation stipulated instead of a new capital requirement; this obligation unnecessarily creates substantial implementation cost and time pressure for our institutions.
The GBIC also believes that, in principle, it makes sense that, according to the proposal, software will – under certain conditions – no longer be subtracted from common equity tier-1 capital in future and that the details will be elaborated by the EBA.
With reference to an integrated internal market within the EU, the GBIC would have liked the Council to show more courage: The EU Commission’s proposal for what is referred to as “cross-border waivers” had been very positive; such waivers would have enabled groups of institutions to centrally manage their capital. It is not understandable that the mechanisms established within the EU (SSM, SRM) are not trusted and that nation-states continue to close themselves off in this respect.
The objective is to adopt the whole package by the end of 2018, although major issues – in particular in the context of bank resolution – are still open. Small and medium-sized institutions which are not wound up under European law, for instance, should not be overburdened “through the back door” by imposing formal requirements such as reporting and authorisation obligations. Furthermore, such obligations must not lead to excessive requirements – such as authorisation obligations – for large institutions that will adversely affect their bank management.
The GBIC is extremely critical of the planned introduction of an authorisation obligation for the repayment of MREL/bail-in capital. In the field of own funds – from which this obligation originates – this requirement is comprehensible because the instruments are made available there on a permanent basis and the authorisation obligation guarantees this continuity. However, the MREL capital (which goes beyond this) involves a much greater amount of paper, rearranged at short notice for management purposes. In the GBIC’s view, it is not conceivable how the planned authorisation obligation can be implemented in practice.