EU Banking Regulations Face Increased Complexity Amid Political Disputes
In a stark assessment of the current state of EU banking regulations, Andrea Campa highlighted the pressing need to dismantle existing barriers to foster a more effective single banking market. “There are things that we can do … but that requires a significant political consensus because those rules are there for a reason; home-host issues are there for a reason,” Campa stated, emphasizing the challenges ahead, reports 24brussels.
The recent update to the EU’s bank capital rules, known as Basel 3, imposes stringent requirements both on individual banking entities and consolidated groups. This approach, deemed politically unfeasible, results in “excess requirements,” according to Campa.
Negotiations surrounding the latest piece of banking legislation in Brussels, specifically a joint crisis management plan for mid-sized banks, have led to an “effort in complexity” rather than simplifying the regulatory framework. Political disputes have produced a convoluted legislative text, as noted by Campa.
Countries have resisted proposals to facilitate access to EU crisis funds for struggling mid-sized banks. Consequently, the agreed-upon rules impose numerous conditions for lenders seeking to utilize these funds during crises.
Regarding the regulatory capital buffers that banks are required to hold against potential risks—designed to preempt taxpayer bailouts—Campa pointed out that the situation is “complex in Europe because we have many authorities making decisions.” He expressed the necessity for a clearer framework on how these buffers are determined.
“The EU system is very complex. It’s not about whether the level of requirements is high or low. It’s just that there are so many different buffers … and they’re set by different institutions. That just leads to complexity and to lack of clarity,” Campa added, underscoring the need for simplification in the regulatory landscape.
