The Association for Financial Markets in Europe (AFME) welcomes today’s publication of the draft report by Rapporteur Jonas Fernandez, which represents an important milestone in the legislative negotiations on the banking package which was published by the European Commission last October in order to implement the final 2017 Basel III rules.
Caroline Liesegang, Head of Prudential Regulation at AFME, said: “European banks have raised hundreds of billions in equity capital since the financial crisis, and their resilience has been proven during recent economic shocks. The co-legislators should therefore uphold their commitment to avoid any significant further increases in capital requirements, which could have negative consequences for lending and the broader economic recovery. While the Commission proposals include some transitional measures to allow the market to adjust, AFME’s impact analysis suggests that capital increases could still be material and the legislative texts need to be reviewed with care.”
In particular, as the Parliament continues its examination of the proposals, AFME recommends that it considers targeted adjustments in a number of areas. These include allowing flexibility on the duration of the above-mentioned transitional measures and avoiding a disproportionate impact on end-users’ ability to access a broad range of important services like trade finance, hedging and trading.
It is important that certain aspects of the package, in particular those which are most relevant for capital market businesses and global in nature are implemented simultaneously and consistently across jurisdictions. In this context, we encourage the Parliament to support the delegation of powers to the European Commission as the most efficient tool for ensuring international alignment.
Finally, we welcome the rapporteur’s initial support for the application of the Output Floor at the consolidated level. This is important to avoid undue capital impacts and fragmentation in Europe, and we call on the Parliament to uphold this approach in the course of their work to finalise the package.