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EU finance ministers will this week push for a cull of financial services laws after bowing to pressure from banks.
The politicians will call for “a comprehensive and ambitious plan for reviewing, simplifying and, where relevant, repealing the existing financial services legislative acts”, according to draft conclusions of this Friday’s Ecofin meeting, seen by the Financial Times.
The push from governments for the European Commission to “put forward ambitious simplification packages” for financial services laws reflects frustration among bank bosses over the bloc’s slow progress in reducing the burden of bureaucracy on their sector.
US authorities under President Donald Trump are implementing a major loosening of bank regulations. The UK is also easing rules.
But bank bosses complain authorities in the EU are far more reluctant to change the complex web of restrictions imposed after the 2008 financial crisis and the subsequent Eurozone debt market crash.
European banks recently complained in a document aimed at EU governments, seen by the FT, that the bloc “now has over 193 texts and nearly 9,000 pages of prudential regulation — three times more than the US or Canada”.
Foreign rivals of big Wall Street banks worry that an easing of US rules will hand the country’s lenders a powerful advantage, allowing them to extend their already dominant position in many parts of international capital markets.
This week’s Ecofin meeting is also expected to call on Brussels to “consider improvements to the mandates” of the EU’s main supervisory authorities, including the European Banking Authority, the European Central Bank’s Single Supervisory Mechanism and the European Securities and Markets Authority.
It will say these improvements should be designed “to ensure better reporting and greater accountability” by the regulators as well as making sure they stick to the objective of reducing the bureaucratic burden on EU financial services.
EU regulators should “carry out a review of the existing stock of regulatory measures with a view to simplifying and identifying outdated or duplicative provisions” and report back to the commission on what is possible, according to the draft Ecofin conclusions, which finance ministers are expected to agree unanimously on.
The Ecofin meeting is expected to conclude that “simplification should not lead to deregulation, which could put financial stability at risk”. But it will also warn that EU financial regulation has “become more complex and more extensive than necessary, thereby burdening businesses, including SMEs, and public administrations and authorities”.
The finance ministers will meet a day after the European Central Bank is due on Thursday to announce the recommendations of a task force it set up earlier this year to examine ways of simplifying the region’s banking regulations.
However, bankers expect the task force to stop short of proposing any lowering of EU bank capital requirements. Instead, it is expected to propose simplifying the rules, such as by combining some of banks’ various capital buffers.
European banks in their recent document to EU governments submitted a list of 10 key recommendations on how to loosen regulatory constraints on the sector. They also called for a freeze of 10 proposed EU banking rules that have “a potential cost of €1tn in credit”.
The sector’s number one recommendation is for the ECB’s supervisory arm to be formally given an additional objective to support EU economic growth and competitiveness — similar to the secondary mandate set for UK financial regulators in recent years.
Bank executives privately complain that ECB bank supervisory officials are unresponsive to calls for them to ease the regulatory burden. They hope that changing the supervisors’ mandate would be a way to increase their accountability and allow policymakers to rein them in.
“They are still quite defensive at the ECB and their bias has always been towards more capital,” said a senior EU bank executive. “Changing their mandate will make them more accountable.”
