The European Commission’s 2021 banking package reforming Directive 2013/36/EU and Regulation 575/2013 has a broad scope. First, it aims to complete the implementation of the Basel III Accord in order to strengthen the banking sector against economic shocks. Secondly, it seeks to strengthen the tools available to the supervisory authorities responsible for supervising EU banks. And finally, it aims to make the banking sector more resilient against ESG risks.
Presented by the EC last October, the package was examined by the Committee on Economic and Monetary Affairs (Econ). The committee adopted two reports on the reform on Tuesday 24 January: one for the directive and the other for the regulation.
These two reports outraged Christophe Hansen (CSV), MEP from the EPP parliamentary group and member of the Econ. For him, they “go against the constitution of a single capital market by pitting large and small countries of the European Union against each other.”
A reform favouring large countries
Among his concerns is the “output floor.” This mechanism introduces minimum capital requirements so that banks have enough funds to cover the risks generated by their activities. But whereas the system provides for these calculations to be made at the level of “local” institutions, the parliament opted for a consolidated calculation--in other words, at the level of the parent company.
This, for Hansen, carries the risk that capital will be concentrated at the level of the parent company and that the subsidiaries will “lose adequate resources to cover the risks arising from their daily activities.” He reasons that, in the event of a crisis, the parent companies would be better protected than their subsidiaries. “While the big European banking groups have their headquarters in the major EU countries, Luxembourg is a country of subsidiaries,” he points out.
He considers that the large member states--France and Germany in the lead--are manoeuvring to “push for a concentration of the banking market which will disadvantage the smaller states” so that “their national supervisors have control over the entire capital of a group.”
Hansen also denounces the new regime governing the establishment of branches from third countries in the European Union. Such a regime “will create new limitations in terms of capital transfers between parent companies and their branches,” limitations which, for the MEP, “will undermine the cross-border model on which the business model of the major international banks in the EU is built.”
Now it’s up to the council
Now that the European Parliament has spoken, what can we expect? A plenary session will be held in February to adopt these two reports and give the green light to inter-institutional negotiations between the parliament, council and commission. The outcome of this session is not in doubt, comments Hansen, “an agreement having [already] been reached between the major political groups.”
However, Hansen believes that “common sense will prevail in the council,” where “Luxembourg has already done a lot of work on the dossier.” And he gives credit to the Bettel government, led by the DP, for being on the same line as he is regarding the council, and for having united the “small European states” around him, including the Netherlands, Malta, Cyprus, Slovenia, the Czech Republic, Hungary, Slovakia and Portugal.
The DP is a member of the parliamentary group “Renew” that pushed the text, even though none of its members voted for the two reports. Charles Goerens is not a member of this committee and Monica Semedo is no longer a member of the party.
This article was originally published in Paperjam. It has been translated and edited for Delano.