20 October 2017

Deutsche Bundesbank's Dombret: Sometimes small is beautiful, and less is more - a Small Banking Box in EU banking regulation

Andreas Dombret outlined how the current regulatory regime of complex rules that governs virtually all banks in the EU came into being. He also laid out a solution for the EU's banking sector: the Small Banking Box - a separate set of rules for smaller, locally oriented, and less risky institutions.

Europe's banking sector is still struggling with the legacy of the financial crisis. Regulatory reform has made sure that this is done in line with clear, strong rules.

“But: In 20 years, do we want Europe's economy to be served by 50 banks - all of them much too big to fail - and not interested in financing rural development? Or do we want a robust sector with several thousand institutions - with very different business models, serving the different needs of different customers? This future banking sector is what I imagine for a robust European economy - it is agile and it is resilient!

I am deeply convinced that it is worth to change regulations toward this end.” he says.

There is a need to strike a better balance between setting standards for internationally active banks and allowing for different business models of the thousands of small and medium-sized banks in Europe.

Clearly, this can be done at European level. That's why there is a need to move forward with proportionality within the current review process of CRR and CRD IV. But we must also push for a more fundamental solution.

Therefore, he was calling on the Commission Expert Group on Banking, Payment and Insurance to give priority to the work on proportionality - the Small Banking Box is the most effective and efficient strategy to enhance proportionality.

Full speech

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