ESBG and UNI Europa Finance believe in strong retail, regional and responsible banking, which is committed to broad distribution channels and to returning a contribution to the society in which they operate.

A traditional and less risky business model is actually able to accompany SMEs and households in the different stages in their life, and to fulfil the broad range of their needs. This generates growth and subsequently jobs, which have been defined as the key priority of the European Union.

For this purpose, ESBG and UNI Europa Finance would like to encourage the European decision-makers to have as pillars the following foundations:

1. Diversity in the banking sector enriches local employment market
The European Commission itself has acknowledged that the diversity of banking business models across the EU is beneficial to competition, enhances the overall banking system’s efficiency, and helps the system overcome shocks. The heterogeneous structure of the European banking sector provides diversity to the system, which is beneficial as it encourages banks to compete, improving their processes and structures in order to survive and better adapt to evolutions.

Diversity also ensures that the full range of services can be offered to the customers, in particular in banks which focus on SMEs and households as they build up centres of expertise with a long record of experience and vast knowledge regarding their needs, problems and business structures.

A varied banking landscape is also crucial with regards to local communities as proximity is the cornerstone of savings and retail banks. Thus through their network of 58,000 branches, savings and retail banks serve 185 million customers and employ 810,000 people in Europe, in particular in rural areas. These stable and highly-qualified jobs contribute to the flourishing economy throughout the EU countries.

2. The Basel III Framework should be adjusted
The compliance with the new capital and liquidity standards set up in the Basel III agreement, which is in the process of being integrated in the European jurisdiction, entails a great challenge for local banks, and by extension to all the financial institutions, in Europe. Although the new framework will no doubt contribute to shaping a more resilient and stable financial system, it should not be to the detriment of financing the economy. Local banks should not suffer from overly strict regulation which is not adapted to their business model, all the more as the initial purpose of the Basel III agreement was aimed at internationally active banks.

As a result existing and upcoming regulation must take into consideration the principle of proportionality to allow local banks to continue to serve its customers, and the real economy as a whole.

3. Financial personal advice should be preserved
Financial advice is by nature highly complex and should be tailored to the specific needs and characteristics of the individual customer. Different stages along the life cycle call for tailormade solutions to balance financial needs and surplus as well as cover potential risks. For this reason, local banks are in a strong position of providing advice to customers throughout their lives, as they build a life-long relationship with customers and know the situation a customer is in.

The development of digitalisation, in particular automated advice, cannot be ignored and can bring positive developments and opportunities for customers, banks and employees. However ESBG and UNI Europa Finance are of the opinion that there should always be an option for a bank to provide a customer with personal advice on products rather than only relying on automated advice. Business models will necessarily need to be developed but the right timing and the right balance between technology and the human factor must always prevail.

In addition, the provision of investment services to retail customers free of charge should be maintained. To do so, the third-party payments models should remain untouched as they have been proven to provide high-quality advice to the most modest of their investors, as acknowledged by the European Parliament and the Council when they were reflecting on this model during the MiFID II Review.

Chris De Noose
Managing Director
ESBG

Michael Budolfsen
President
UNI Europa Finance

For further information please contact:
Caroline Gourisse
Head of Regulatory Affairs
ESBG
caroline.gourisse@wsbi-esbg.org

Morten Clausen
Policy Officer Finance
UNI Europa
morten.clausen@uniglobalunion.org