Having faced a flood of EU rules over the last six years intended to regulate “every corner” of the financial system, banks are in for something unusual next month when the European Commission will explicitly propose to dial back on one of the primary obligations they now face.
Jonathan Hill, the EU’s financial services chief, is set to propose a substantial reduction of capital requirements on banks’ holdings of securitised debt, in an effort to spur lending and growth. Similar plans are in the pipelines for insurers. We at Brussels Blog got our hands on the plans and have posted them here and here.
While his predecessor, France’s Michel Barnier, pledged during his mandate to tackle what he said were both structural and moral weaknesses in the financial system, Britain’s Hill has said that “today the biggest threat to financial stability is the lack of growth and jobs.”
The proposal on asset-backed securities (ABS) is the first major piece of legislation Hill has proposed since taking office in November. If approved by governments and the European Parliament, the new securitisation rules would amend one of Barnier’s signature legislative achievements: the EU’s new bank capital rulebook adopted in 2013.
But the change of approach from Barnier to Hill is not as neat (regulation-minded Frenchman to lax Anglo-Saxon) as it first appears. In his last year in office, Barnier had already steered the agenda towards how regulation can support long term financing of the economy, saying that the job of post-crisis re-regulation was largely complete. In addition, key parts of the current commission’s plans for a “capital markets union” draw on a Barnier-era policy paper. Read more