Featured Product

    Andreas Dombret of Bundesbank on Addressing Proportionality in Europe

    January 24, 2018

    Dr Andreas Dombret of Deutsche Bundesbank spoke in Cape Town about the the importance of proportionality in regulation at the European as well as the international level. He emphasized that "The success of Basel III depends crucially on whether or not we get the implementation right." He further explains that to get implementation right involves full and consistent implementation with the agreed standards, while accounting for regional differences and local circumstances. To this end, he said that "I am convinced that we need to strengthen the principle of proportionality in banking regulation."

    Dr. Dombret highlighted that "... proportionality is necessary to safeguard the original goals and spirit of the Basel framework. The European Union is acknowledging this ... . The latest development is a draft report by the European Parliament, to which amendments could be made up until today and which I expect to be finalized in the near future." He then explained that the "relief measures" are targeted at small institutions, those "with a moderate amount of total assets." However, what qualifies as a "moderate amount" differs in each EU member state. The quantitative threshold should be supplemented by additional criteria that prevent institutions with riskier business models from benefiting from simplified rules. For example, banks that qualify must not use internal models and should have a small trading and a small derivatives book. Although "...there will almost never be a perfect list of criteria that covers every eventuality, the final decision should always rest with the supervisors." Next, he discussed "...the choice between two alternatives for improving proportionality. One is to change the fine print, that is, to introduce simplifications to and exemptions from individual rules. The other is to create a whole new framework tailored to small and low-risk banks. I personally believe the latter approach to be the more appealing ...." Bundesbank has been involved in the development of a concept for such a framework called the "Small Banking Box," said Dr. Dombret.

    He said that it remains to be seen whether the Small Banking Box will be the way forward for EU, while highlighting that "the most recent European Parliament report is promising." The focus is on reducing the administrative burden and the paperwork that the complex regulatory requirements create in various areas for small and low-risk institutions. "Among the measures we are looking at are exemptions from disclosure requirements, reductions in the granularity of reporting requirements, and a simplified form of the net stable funding ratio (NSFR). All of this is very close to what the Bundesbank has proposed and supported in the past .... As a rule of thumb, we can say that any rules that are dispensable for effective supervision are up for debate." However, this also means, according to Dr. Dombret, that many rules are not up for debate; for example, there can be no concessions in terms of risk-based capital ratios, the leverage ratio, or the short-term liquidity ratio. He also highlighted that the Basel Committee considers proportionality to be a relevant topic and that the Financial Stability Institute (FSI) has already performed an insightful cross-country comparison on proportionality in banking regulation. Dr. Dombret concluded that he highly values this work and would appreciate to see more such work on proportionality from the FSI or the Basel Committee in the near future.

     

    Related Link: Speech

    Keywords: International, Europe, Banking, Proportionality, Small Banking Box, Basel III, Bundesbank, BIS

    Featured Experts
    Related Articles
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Revises Branch Return and Updates Guidance for Regulatory Reports

    PRA published the policy statement PS17/19, which contains the final policy related to changes in the format and content of the Branch Return Form and reporting guidance.

    September 12, 2019 WebPage Regulatory News
    News

    ECB Publishes Version 1.5 of AnaCredit Validation Checks

    ECB published Version 1.5 of the AnaCredit validation checks.

    September 12, 2019 WebPage Regulatory News
    News

    FINMA Outlines Treatment of Stablecoins in Supplement to Guide on ICO

    FINMA published a supplement to its initial coin offerings (ICOs) guidelines, outlining the treatment for stablecoins under the Swiss supervisory law.

    September 11, 2019 WebPage Regulatory News
    News

    FCA and BoE Issue Updates on Brexit Preparations for Financial Sector

    FCA and BoE published important information to help regulated firms in preparing for Brexit.

    September 11, 2019 WebPage Regulatory News
    News

    Ursula von der Leyen Presents Structure of Next European Commission

    President-elect Ursula von der Leyen has presented her team and the new structure of the next European Commission.

    September 10, 2019 WebPage Regulatory News
    News

    FED Proposes to Revise and Extend Reporting Form on Systemic Risk

    FED proposed to extend for three years, with revision, the Banking Organization Systemic Risk Report (FR Y-15; OMB No. 7100-0352).

    September 10, 2019 WebPage Regulatory News
    News

    EBA Issues Revised List of Validation Rules for Reporting

    EBA published the revised list of validation rules (version 2.9) in its implementing technical standards on supervisory reporting.

    September 10, 2019 WebPage Regulatory News
    News

    Bundesbank Publishes Supplementary Validation Rules for Reporting

    Bundesbank published the updated document containing supplementary validation rules in the context of the implementation of the reporting system at national level.

    September 10, 2019 WebPage Regulatory News
    News

    APRA Licenses Xinja Bank as Authorized Deposit-Taking Institution

    APRA granted Xinja Bank Limited a license to operate as an authorized deposit-taking institution without restrictions, under the Banking Act 1959.

    September 09, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3807