Daniel Quinten, Member of the Board of Managing Directors of the National Association of German Cooperative Banks (BVR), speaking on behalf of the German Banking Industry Committee (DK), states: “The European Commission correctly identifies key problem areas, including, for example, the excessive complexity of regulatory requirements and the particular burdens faced by small, low-risk institutions. However, concrete measures to address these problems, as well as the well-known competitive disadvantages arising from rising European capital requirements, are either lacking or remain too vague.”

Whilst the European Commission is, for example, developing specific improvements for cross-border banking groups, it remains largely unclear what relief measures it intends to provide for small and medium-sized institutions with a low-risk, regionally focused business model. A separate framework is needed here to strengthen competitiveness.

There is also a lack of clear proposals for improvement with regard to the shortcomings of the multi-level regulatory framework (Lamfalussy process), which, in the DK’s view, is in urgent need of revision due to the increasingly complex interaction between Level 2 and Level 3 measures. In particular, the European Financial Supervisory Authorities must be obliged to consider the impact of their regulation on the competitiveness of the banking sector.

Furthermore, capital requirements in Europe must not increase further. Particularly in view of the announced relief measures for US banks, transitional arrangements in Europe must be made permanent and planned regulatory tightening measures must be scaled back. It is encouraging that the European Commission has recognised that competitiveness requires a cultural shift amongst all stakeholders and that regulation should be more proportionate and streamlined in future. So far, however, this has remained at the level of appeal.

It is to be welcomed that the European Commission intends to withdraw its 2015 EDIS proposal. In principle, this opens up opportunities for new, constructive discussions. At the same time, these announced new discussions on European deposit protection must safeguard the autonomy of national deposit guarantee schemes and institutional protection schemes.

Quinten continues: “Overall, care must be taken to place the competitiveness of European banks at the heart of the forthcoming legislative proposals and not to link it to other issues.” Otherwise, controversial issues – such as the further design of a common European deposit guarantee scheme – could block progress on particularly urgent projects, such as capping capital increases and establishing a separate regime for small banks.