Strong banks for a single European financial market

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Example: waivers With the help of cross-border capital and liquidity waivers, banks could deploy capital in Europe where it is needed to generate economic growth. We estimate that billions of Euro of regulatory capital and liquidity could be freed up for the G-SIBs of the Eurozone alone. would be significant administrative relief for banks and customers. When setting up a central repository of this kind, however, it will be essential to ensure that data requests from other sources are simultaneously dropped. Otherwise, we will merely end up adding a further layer to an even more expensive and convoluted regime. The reporting regime has been repeatedly extended and, at some banks, the number of staff handling reporting has doubled despite the general cutback in personnel. This raises the pressing question of whether the more than 60,000 data fields that supervisors can ask banks to complete in the context of FINREP alone can be evaluated in an effective way at all, or whether it is not time to limit ourselves to less, but more meaningful and standardised data. The first step should be to establish standardised definitions of the data involved. At present, the information reported by banks in different member states sometimes differs widely. We would also recommend that the various national and European authorities coordinate their data requests much better. New solutions are needed to reduce overlaps when drawing up and applying reporting requirements. Ideally, a central, EU-wide data repository should be established. Before issuing new requests for data, supervisory authorities could check to see whether the desired data already existed. This would allow authorities to access existing data more quickly and banks would not need to complete new data fields unnecessarily. The result Example: definitions While banks in some member states report loan-to-value ratios using the purchase price of property as the basis for their calculations, Germany takes a more conservative approach and uses the collateral value. As a result, the reported data is not really comparable. Banks also face the problem of having to constantly make adjustments in response to new reporting requirements, thus tying up a large part of their IT budget. Even small changes can be time-consuming and costly, as they have to be thoroughly tested to see how they interact with the rest of the system. These resources could be better invested in developing digital innovations. Example: adjustments More long-term planning should go into reporting requirements and changes should be consolidated and introduced throughout Europe on certain predefined dates so as to keep the administrative workload manageable. Banking union 7
2. Capital markets union A stable single financial market requires both a functioning banking market and further integration of the European capital market. This is the only way to ensure that risks are spread evenly and appropriately among a number of market participants. Both markets unfold their effect together – they do not operate side-by-side in isolation. They have to complement each other in what they do. As part of its efforts to drive forward capital markets union, the European Union has undertaken various measures that – taken individually or as a whole – are unfortunately unlikely to strengthen the European capital market and consolidate its integration in the long term. The EU has, in particular, failed to fully live up to its promise to focus on and foster the market. Not only the example of securitisation shows that there is a danger of regulation being adopted which ignores market needs. For this reason, fresh impetus is needed to create a capital markets union. Example: securitisation European regulation of securitisation should be designed in such a way that it can really lead to a responsible revival of the market – securitisations are a key instrument for linking financing by banks with the capital markets. Regulation which ignores market needs risks damaging the market instead of reviving it. Capital markets union is intended to strengthen Europe’s position as a financial centre in a world of global competition, increase its appeal (competitiveness) and openness to foreign investors and thus attract capital and liquidity from abroad. Up to now, the City of London has played the primary role in achieving this. When the United Kingdom leaves the EU, we will lose this European financial centre, however. Though a comparable new centre cannot be created in the EU27 by legislation alone, the EU can, by furthering capital markets union, establish a better environment for attracting foreign capital. This will require the largest possible single market, in which it is naturally market participants who compete to determine the failure or success of old and new players, products and locations. Example: withholding tax A continuing obstacle to cross-border transactions in the capital market is the different and complex processes and forms in member states for obtaining refunds of withholding tax on income from securities. This hurdle on the road to capital markets union is also a worldwide obstacle to investment. In the medium term, it would benefit customers if these processes were simplified and harmonised. In the long term, refund processes and forms could be replaced by the application under double taxation treaties of relief from withholding tax for the final beneficiary at the time of payment (relief at source). 8 Capital markets union
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Strong banks for a single European financial market

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