by Huw Jones
LONDON (Reuters) – The European Central Bank (ECB) on Friday rejected calls from commercial banks in Europe for a relaxation of capital rules, which the European banking sector says would allow them to increase loans granted to households and businesses and to compete on an equal footing with the American banks.
According to the European Union Banking Federation (EBF) and the consulting firm Oliver Wyman, despite the coordination of banking rules at international level by the regulatory authorities, differences remain in practice in their operation and in their implementation.
“A reassessment of current capital requirements and supervisory procedures could increase the amount of bank lending available in the best-case scenario by around €4 trillion to €4.5 trillion, which represents an increase of almost by 30% compared to current volumes”, write in a report the EBF and Oliver Wyman.
According to this report, the difference in regulatory costs between EU banks and their US counterparts can translate into a 0.8 to 1.0 percentage point difference in return on equity.
“Policymakers should redouble their efforts to complete the Banking and Capital Markets Union,” the report says, referring to the overdue Banking Union plan put in place by European governments for a single oversight of the sector. with a single resolution mechanism after the sovereign debt crisis ten years ago.
“For their part, banks should continue to focus on improving operational efficiency and digitization. They should position themselves for a long-awaited consolidation process in the eurozone, which will also support a better allocation of resources beyond EU borders,” the report continues.
The ECB, in charge of the supervision of the main banks in the euro zone, rejected the conclusions of this report, considering that the banks of the Union were not disadvantaged compared to their American competitors in terms of regulation or supervision. , deeming the regulatory requirements on both sides of the Atlantic “largely comparable”.
“The largest European banks with a global dimension even have slightly lower regulatory requirements than their counterparts across the Atlantic,” an ECB spokesperson said.
“It is also doubtful that lower capital requirements lead to higher lending: what is proven is that low levels of capital lead banks to cut lending sharply in a crisis, which compounds the negative impact on the economy,” he added.
The ECB said it was ready to discuss with the sector on improving supervision procedures.
Andrea Enria, the head of banking sector supervision at the ECB, said last month that the main problem for banks was low profitability, deeming “cost-efficiency” insufficient, even if the increase in interest rate should help to improve the situation.
(Reportage Huw Jones; French version Claude Chendjou, edited by Blandine Hénault)