The European Commission has published a speech given by its Vice-President, Valdis Dombrovskis. The speech is entitled What next for Europe’s banking system?
In his speech Mr Dombrovskis discusses the Commission’s approach to regulating Europe’s banking sector. Key points in his speech include:
- to ensure that Europe fully tackles the risks linked to global and systemically important banks, the Commission will propose that such banks hold a minimum total loss-absorbing capacity (TLAC) so that losses can be absorbed better. In addition, the TLAC standard will be incorporated into the existing minimum requirement for own funds and eligible liabilities (MREL). The Commission expects up to 13 banking groups will have to comply with the TLAC standard in the EU. Where other banks pose similar systemic risks, the Commission will expect Member State resolution authorities to deal with this on a case by case basis;
- the Commission will introduce a leverage ratio of 3% which will be added alongside the risk-based own funds requirement in the Capital Requirements Regulation;
- the Commission will introduce a net stable funding ratio;
- the Commission wants to clarify how Pillar 2 capital requirements should be applied by Member State competent authorities and increase transparency by introducing disclosure obligations in this area; and
- the Commission will propose to introduce a “SME supporting factor” to all SME loans and apply similar measures to infrastructure finance. The Commission will propose bank capital charges for investments in infrastructure projects to be reduced, providing these comply with criteria which lower risk profiles and increase the predictability of cash flows.