Frankfurt In the struggle for an important banking reform, the European financial sector has achieved a significant stage victory. The finance ministers of the European Union (Ecofin) want to soften the internationally agreed banking reform “Basel III” in the EU in several points.
This emerges from a position paper by the Council, which is available to the Handelsblatt. “The implementation should avoid a significant increase in capital requirements for the EU banking system as a whole and take into account specificities of the EU economy,” the paper says.
While banking associations welcomed the changes, many financial regulators are angry. You had recently warned in emphatic terms against watering down the rules. The struggle over banking reform is another example of growing tensions between banks and regulators.
At the Bundesbank symposium in Frankfurt on Tuesday, it also became clear that bankers and bank supervisors currently assess the risk situation differently. Several top managers reported that business was going well and warned against pessimism.
So far there have been no distortions in the loan books, said Hypo-Vereinsbank boss Michael Diederich. “Many of the companies still have full order books.” His bank is also well prepared for an impending recession. “We have done everything to prepare for this situation.”
Commerzbank boss Manfred Knof made a similar statement. “There is no reason for doomsday scenarios – neither for the German economy nor for the German banking industry,” he said.
ECB chief supervisor: “We are in a delicate situation”
Bundesbank board member Joachim Wuermeling, on the other hand, warned the institutes against weighing themselves in security. “We are not yet familiar with the current triple crisis of inflation, recession and interest rate hikes,” stressed Wuermeling. Added to this is the specific vulnerability of companies due to their dependence on energy and gas.
“That’s why our previous experience and models hardly help us to adequately assess the risks,” said Wuermeling. “So what we need to do is meticulously monitor loan after loan.”
Andrea Enria, Head of ECB Banking Supervision, also warned financial institutions against underestimating the negative effects of the turnaround in interest rates on their balance sheets. “We are in a delicate situation,” said Enria.
The different assessment of the situation contributes to the fact that there are also different views on the use of profits. The financial regulator wants banks to hold back on distributions in order to have enough buffers for bad times.
On the other hand, many financial institutions would like to pay out more in view of the good business in recent quarters in order to satisfy their shareholders. Unicredit, for example, has announced that it will distribute a total of 16 billion euros by the end of 2024 – and is thus encountering resistance from the financial regulator.
Banks are becoming more confident in the face of rising profits
In addition, some bankers generally complain that the ECB intervenes too much in their business. In a letter to ECB Director Ramon Quintana, Lorenzo Bini Smaghi, head of the supervisory board of the major French bank Société Générale, criticized the fact that ECB representatives attended bank supervisory board meetings.
“As far as I know, there is no other regulator in developed economies that attends board and committee meetings,” reads the letter, which was recently reported by Bloomberg.
In Germany, after the financial crisis, it was common for representatives of the financial supervisory authority to attend bank supervisory board meetings, but not in other European countries. Since the introduction of the uniform European banking supervisory authority in 2014, the practice has now become established that ECB representatives attend supervisory board meetings at large banks once or twice a year.
“Banks have regained the upper hand given relatively high profits over the past 12 months,” said a person familiar with the discussions. “They are therefore becoming more and more courageous and often criticize things that they feel patronized about.”
Bini Smaghi’s criticism is also notable because he was once a member of the ECB’s Executive Board. In his old role, he made a speech in 2010 calling for financial regulators to be “more proactive, more forward-looking and at times more intrusive.”
Finance Minister Lindner wants to strengthen competitiveness
The banks are also getting more through with their demands from some politicians. “Anyone who wants to make the future of Germany competitive as a whole must also make the blood circulation, i.e. the financial system, competitive,” said Finance Minister Christian Lindner last week. That is why the federal government is pursuing “not only the goal of stability, not only the goal of consumer protection, but also expressly the goal of making Germany’s financial center more competitive.”
This attitude is now also reflected in the paper by the EU economics and finance ministers. The EU Commission had already toned down the proposals of the Basel Banking Committee, an international regulatory body – and the EU governments are following suit. That was well received by the German banking industry. “This takes account of important European peculiarities such as bank financing for companies that do not have an external rating or the low risk of residential real estate loans,” said the central association of German banks and savings banks, the “Deutsche Kreditwirtschaft”.
In addition, the EU finance ministers initiated further relief. “From the point of view of the German banks and savings banks, the fact that the Council is also opposed to the planned tightening of trade financing or the financing of public customers is correct,” praised the German banking industry.
The Federal Association of Public Banks (VÖB) in Germany was satisfied that savings banks and Volksbanks should continue to be able to give each other loans within their respective financial network without having to back them with equity. That is “gratifying”.
Cooperation: Moritz Koch
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