(Feb 11): Commerzbank AG chief executive officer Bettina Orlopp said current European proposals for reducing the regulatory burden on banks don’t go far enough, adding urgency to the debate about the bloc’s declining competitiveness one day before its leaders will meet to discuss the topic.
“We are clearly a strong supporter, not only to think about simplification, but also deregulation,” Orlopp said on Wednesday on Bloomberg TV. “We also clearly advocate to rethink that” given efforts in the US and the UK to roll back rules and capital levels.
Authorities including the European Central Bank (ECB) have thus far sought to simplify banking regulations, while warning against lowering capital requirements for the industry. European Union (EU) political leaders are set to discuss on Thursday how to strengthen the single market, reduce economic dependencies and boost EU competitiveness.
EU banks have become increasingly concerned — and vocal — about a potential competitive disadvantage from a regulatory rollback in the US, which could result in massively lower capital requirements for the country’s banks. By contrast, EU regulators have defended the level of capital in the system as having helped prevent financial crises. They’ve focused on addressing the complexity of their banks’ requirements and speeding up oversight processes instead.
Orlopp said in the interview on Wednesday that one issue of particular concern to her was around exemptions that only temporarily weaken a tough plank of new capital standards known as Basel III. She also cited the issue of more onerous treatment of loans to companies that don’t have credit ratings, a particular point of attention for German banks, given their relations with the country’s so-called Mittelstand.
Banks say that raising capital cushions would choke off the economy because it makes loans less profitable. The ECB and other watchdogs reject that argument, yet elected representatives ultimately have major sway over changes to regulations.
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