Speech by Commissioner Jonathan Hill at the public hearing on the ‘Call for Evidence’ – a review of the EU regulatory framework for financial services
Brussels, 17 May 2016
Selected excerpts for SFM readers
Smaller banks have been very clear that our banking legislation does not do enough to take their size properly into account. That’s a concern I understand and to which I’m sympathetic. We’re already looking at this as part of our review of the Capital Requirements Regulation, CRR, and its sister directive CRD4. I want to see whether we can extend measures already built into the system to make it more proportionate.
I’d also like to see more proportionate reporting and disclosure requirements for the banking sector. Can we do more to simplify complex reporting and disclosure templates? Can we streamline what needs to be disclosed to make it more understandable, and therefore more meaningful? I’m sure we can, and we’re working out how best to do it.
In the future, I’m clear that we need to be careful before implementing anything that could make the situation more difficult. That’s why we’ve written to ESMA to ask for a more cautious approach on MiFID II liquidity calibrations. It’s why we’ve asked the EBA to advise us on how to apply Basel measures – like the Net Stable Funding Ratio liquidity rules and the leverage ratio – in way that works for European businesses. And also to assess the impact that the Fundamental Review of the Trading Book would have on the European banking sector. I know there is a lot of concern about how these Basel measures will be implemented. So we’ll shortly be launching targeted consultations on the NSFR and the Trading Book Review.
Asset managers, among others, said they’re being asked to report the same data in different forms to comply with separate pieces of legislation. So I want to look at whether their reporting burden could be lowered without affecting the quality of what’s reported. They shared the concern that constraints on banks’ balance sheets are reducing liquidity, and stressed the importance of regulatory stability as AIFMD and the recent amendments to the UCITS framework continue to bed down.
Financial services companies, pension funds and corporates all call for more proportionality in the European Market Infrastructure Regulation – EMIR, and point to the way it interacts with bank capital rules. They emphasise EMIR’s broad scope, and argue that the risk management benefits of central clearing can still be achieved with a more proportionate approach. In a way which lessens the burdens on smaller financial firms, corporates and pension funds; takes business size and business models more into account; and doesn’t discourage central clearing services being provided.
It should be possible to make EMIR more proportionate and continue to mitigate systemic risk in our derivative markets. It should be possible to lower administrative reporting burdens. And all this while ensuring supervisors have enough information to monitor risks, and intervene if necessary. I want to use the EMIR review to do that.
We’ll complete our analysis by the summer, by which time we should be clearer on what further actions are needed. Discussions today will help us do that. But the evidence you’ve already provided, and the picture that’s emerging of how different pieces of legislation interact has already given us a lot of useful intelligence.
The full speech is available at europa.eu/rapid/press-release_SPEECH-16-1788_en.htm
