12 October 2011

ECON Committee hearing on CRD IV

Andrea Enria, Chairman of the European Banking Authority (EBA), presented CRD IV from the supervisor’s point of view. EBA will have to draft many technical standards and some of them by July 2012 which gives EBA a very short period of time between the final adoption of CRD IV and the drafting of the standards. Mr Enria thinks that only financial instruments of the highest quality should be included in the Tier one capital. Andrea Enria said that the impact of CRD IV on lending to SMEs is very difficult to measure.

Dominique Graber from BNP Paribas Fortis focused her presentation on the banks’ business and its importance for the economy. She also mentioned that CRD IV will put European banks in a disadvantageous position compared to the US banks.

Andreas Treichl, Chairman of the Management Board of Erste Group Bank AG, focused his intervention on the SMEs and the impact of CRD IV on small and local banks that lend to the real economy. He is in favour of CRD IV and mentioned that small banks do not want to get into the business of trading.

Claudia Buch, Professor for International Macro-economics and Finance at the Institute for Applied Economic Research (IAW) in Tübingen, stressed that it is important that capital requirements are increased in order to make the banking system less vulnerable to macro-economic shocks. She mentioned that there is empirical evidence that higher capital requirements for banks will not have a negative impact on bank lending. Concerning the zero risk weight on government bonds, she said that it is a model that should be abandoned. Ms Buch said that there is also empirical evidence that small banks could be of systemic relevance if all of them are exposed to the same macro-economic shock.

Thierry Phillipponnat, Secretary General of Finance Watch, also highlighted that banks’ lending capacity will not be affected by higher capital requirement. He said that CRD IV does not go far enough in order to create a more European resilient banking system. Among the reasons he presented, Mr Phillipponnat argued that using risk weight ratios as the only tool is not enough; a leverage cap should also be introduced.

During the Q&A session, Vicky Ford (ECR, UK) asked about the different positions held between the ESRB and the EBA concerning the possibility of Member States going beyond CRD IV. She also asked if non-financials have been fully involved in the Commission consultation process.

Sven Giegolds (Greens, DE) asked the speakers to provide ECON members with reports showing whether or not there is evidence that CRD IV will be a cost for the economy.

Sharon Bowles (ALDE, UK) said that there should be consistency in financial services regulation as regard end users. She also questioned whether trade finance is being considered in the right category of risk-weighted assets.

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