Council must deliver on bank risk sharing, say S&Ds


Euro & Finance

Press release

Following an important vote last night in the economic and monetary affairs committee, S&D Euro MPs called on the Council to advance works to reduce risk in the banking sector and further strengthen the resilience of EU banks. The Socialists and Democrats urged European finance ministers to agree on serious and ambitious proposals to reform the European Monetary Union without further delay. Lack of progress has already cost European citizens excessively.
Parliament's negotiator for CRR/CRD, Peter Simon MEP, stated:
“Yesterday, we sent a strong signal for more financial stability and clear regulatory requirements for small and low-risk banks. The idea that a small, low-risk bank is treated in the same way as a large international bank should be a thing of the past. This means that there must be relief for small and low-risk banks in terms of reduced administrative burden, without reducing prudential requirements, such as minimum own funds or liquidity requirements.
“Proportionality in banking regulation also means that large, systemically important banks, which in the past have been partly reliant on taxpayer bailouts as a result of their risky business models, are not being handled with kid gloves. The European Parliament's position is that large, systemically important banks should be required to maintain more capital by complying with a stricter leverage ratio. This means that we are going further than the proposal of the European Commission. Furthermore, risky trading transactions should be more accurately covered by a new framework.
“In addition, the issue of sustainability should be taken into account more in the future. Banks should consider risks arising from environmental, social and governance issues by complying with European guidelines. The European Parliament has also agreed that gender balanced remuneration in banking has to be monitored, reported and complied with in the future.”
S&D Group spokesperson on economic and monetary affairs, Pervenche Berès MEP, added:
“Now that risk reduction measures are about to be agreed on by the co-legislators and that the French and German governments finally agreed to take responsibility, the EU needs to provide as soon as possible a credible safety net for depositors all over the continent. Only by building the third pillar of the Banking Union, EDIS, will Europe respect its commitments as regards solidarity and therefore live up to its values.”
S&D negotiator for BRRD/SRMR, Pedro Silva Pereira MEP, stated:
“The position voted last night on the Bank Recovery and Resolution Directive (BRRD2) is globally positive and balanced. We want banks to hold enough own funds and eligible liabilities (MREL) to absorb losses and facilitate the recapitalisation of banks in case of resolution in order to protect the taxpayers. We also want them to be able to finance the economy, promoting economic growth and job creation. We believe this difficult balance was reached. In future discussions with the Council, we Socialists and Democrats will keep defending a solid system towards risk reduction and a reliable framework to defend our citizens’ deposits and investments for when difficult times come.”
S&D MEP Roberto Gualtieri, chair of the economic and monetary committee in the European Parliament, added:
“With last night’s vote, the Parliament approved a package that strikes the right balance between enhancing the resilience and stability of the banking sector and providing the necessary support to growth. Reducing risks in the banking system has been high on our agenda for the past years. We are confident that by approving these measures we will deliver a solid legislative framework for banks to operate in.”
Note to editors
The Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD), adopted in 2013, set out prudential requirements for banks and investment firms and rules on governance and supervision.
The Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), adopted in 2014, set the rules on the recovery and resolution of failing institutions and establish the Single Resolution Mechanism.
Risk reduction refers to all measures such as the banking package, the non-performing loans (NPLs), as well as to structural reforms, the reduction of public debt and the attention to deficits.
Risk sharing refers to the third pillar of the Banking Union (EDIS), to any form of debt mutualisation (eurobonds) and to a lesser extent to the new proposal on SBBs, the EMF and the Eurozone’s fiscal capacity.