Current positions on the regulation of banks and the financial markets - Focus area: the coronavirus crisis
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Current positions on the regulation of banks and the financial markets NOVEMBER 2020 Focus area: the coronavirus crisis
VÖB in Europe
BERLIN FRANKFURT
■ Headquarters with close to 80 staff members ■ Regular exchange of views with BaFin and the
■ Professional support for member institutions European Central Bank (ECB)
■ Development of common positions and exchange of ■ Five press conferences per year
views in expert committees and working groups ■ Eight members are based in Frankfurt
■ Contact with the German Federal government, and
with both chambers of the German parliament PARIS
(Bundestag/Bundesrat) ■ Liaison office
■ Regular contact with the European Banking
BONN Authority (EBA) and the European Securities and
■ Regular exchange of views with the German Federal Markets Authority (ESMA)
Financial Supervisory Authority (BaFin)
■ Registered office of VÖB-Service GmbH subsidiary
BRUSSELS
■ Eight local employees
■ Regular contact with the European Parliament and the
European Commission
■ Member of the European Association of Public Banks
(EAPB)
Current positions on the regulation of banks and the financial markets NOVEMBER 2020
CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
IRIS BETHGE-KRAUSS | EXECUTIVE MANAGING DIRECTOR
Dear readers, transparent exchange of information are prerequisites for
our success. The 'Current positions on the regulation of
The coronavirus crisis poses great challenges for society, banks and the financial markets' are a cornerstone of our
the way we live, our daily interactions, and the economy. open communication. With this regular publication, we aim
The pandemic has hit Germany and the other European to inform you about key legislative initiatives and regulatory
countries with great force. During the first peak in spring, requirements. This is the second consecutive publication
which in many countries was accompanied by widespread with a focus on the coronavirus crisis. As VÖB, we take a
disruptions to public life, unemployment levels rose clear stand and welcome a package of measures for direct
significantly amid an economic slump. To mitigate the and indirect economic support.
consequences of this outbreak, many countries have
launched unprecedented budget and fiscal stimulation Our popular publication series helps us to successfully
programmes. represent the common interests of our 59 member
institutions, on a national and international level – and to
In Germany, examples of major support measures are the support decision-making by politicians and supervisory
grant and development programmes on federal and state authorities in a results-oriented and hands-on manner.
level. These programmes, developed and continuously Through our work, we aim to take part in shaping powerful,
improved during the first half of the year, will also support modern, competitive and customer-oriented financial
German businesses during the second wave of COVID-19 centres in Germany and Europe.
infections. Therefore, politics and society can continue to
rely on strong public-sector banks when combating the I hope you will find this publication both interesting and
impact of the pandemic. Promotional banks, pass-through inspiring. Together with my colleagues, I will be happy to
institutions, and principal banks are ready and prepared answer any questions you may have.
to support the self-employed, entrepreneurs, and their
families. Yours sincerely,
As VÖB, we support our members by taking a part in shaping
the framework structure for regulatory and supervisory-
related development measures. Sound skilled work and a
4CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
Focus area: the coronavirus crisis
OUR TOPICS
Coronavirus-mitigating measures p. 6 9 Requirements for banks’ IT systems p. 17
1 EU Funding Policy 2021–2027 p. 8 10 NEW: Digital euro and
crypto asset regulation p. 18
2 Implementation of Basel IV in the EU p. 10
11 NEW: Digital securities p. 19
3 Discussions concerning the European
Deposit Insurance Scheme p. 11 12 Sustainable finance p. 20
4 Development of banks' internal 13 The impact of COVID-19
risk management process p. 12 on anti-money laundering p. 21
5 MiFID II / MiFIR review p. 13 14 NEW: Draft bill on the amendments to the German
Restructuring and Insolvency Law p. 22
6 NEW: Bundesbank
refinancing programmes p. 14 15 COVID-19 and workplace rights
across Germany p. 23
7 Reform of digital competition law
(Act against Restraints of Competition/ Overview of promotional banks and Landesbanken p. 24
Digitalisation Act) p. 15
8 Digital payments and
open banking p. 16
5CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
Coronavirus-mitigating measures
Cometh the hour, cometh the man: the coronavirus crisis has called upon pub-
lic-sector banks to step into the light. We advocate the following measures in
the COVID-19 pandemic.
The coronavirus crisis is also leaving its marks on the crisis. As in the first half of the year, it is essential that
second half of 2020. It is challenging Germany and our companies have access to sufficient liquidity to allow
European neighbours to a hitherto unknown extent. for an economic recovery. In acute crises, public-sector
Social and economic consequences are huge and, as of banks have a role of the utmost importance to play. That
yet, cannot be captured in their intensity and extent. The also applies to the ongoing coronavirus crisis. We, as the
measures implemented to contain the pandemic, partly Association of German Public Banks (Bundesverband
including massive interventions into everyday life, are Öffentlicher Banken Deutschlands, VÖB), voice our views
plunging small and large companies alike into dramatic and opinions on the current developments and advocate
existential crises – despite full order books prior to the the following measures aimed at counteracting the
COVID-19 pandemic.
OUR POSITION
DEVELOPMENT MEASURES FOR THE ECONOMY • We are in favour of postponing burdensome regulatory
• We advocate that the EU state aid rules remain relaxed initiatives. This applies especially to first-time application
during the COVID-19 pandemic. This is the only way for of the CRR II and the application of guidelines established
promotional banks to contribute to saving jobs and by the European Banking Authority (EBA), e.g. on the
companies with their programs. definition of default, on lending and monitoring, on
• We call for negotiations on the Multiannual Financial outsourcing and non-performing exposures.
Framework 2021–2027, the Next Generation EU recovery • We believe that the first-time application of the Basel III
fund for 2021–2024, and the EU Regulations linked finalisation (Basel IV) should be postponed beyond 2023
to funding programmes to be quickly finalised. The and that a review of its effects should be conducted in
promotional banks need planning certainty at the light of the coronavirus crisis.
beginning of the new funding period, starting on • We call for aid provided by way of pass-through
1 January 2021. mechanisms to be excluded from the Leverage Ratio.
• We are in favour of capital relief measures and buffer
BANKING REGULATION AND SUPERVISION requirements being applied analogously to the Minimum
• We advocate that the support and participation of Requirement for Own Funds and Eligible Liabilities
institutions in governmental development measures (MREL).
should be treated as non-contributory in terms of the EU • We advocate the suspension of further non-mandatory
bank levy, and we see urgent need for improvement in the reporting obligations and statistical requirements,
process of passing through trustee loans, or development together with the postponement of data deliveries.
and promotional loans to end-customers. • We advocate the suspension of burdensome
• We advocate that the target contribution of the Single announcements by supervisory authorities, or the
Resolution Fund (SRF), to be reached by the end of 2023, provision of corresponding legislative clarifications.
be based upon the level of deposits at the time the • We call for an extension of the timeframe for developing
SRM Regulation came into force (1 January 2016), set at the amendment to BaFin’s Supervisory Requirements
approximately €55 billion. for IT in Financial Institutions (BAIT), and for a one-year
time limit for implementing new requirements following
publication or entry into force.
6CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
CAPITAL MARKETS • We advocate no comprehensive expansion of the
• We are committed to easing the funding requirements set consumer loan forbearance rules to all loan types (e.g.
by the European Central Bank and Deutsche Bundesbank corporate loans, interbank loans, municipal financing)
(i.e. easing collateral requirements to participate without government-based security measures in favour of
in liquidity-providing operations, comprehensive our institutions.
implementation of the ACC framework by Deutsche
Bundesbank). LABOUR LAW
• We believe it is necessary to postpone the obligation of • We advocate that the Federal Staff Representation Act and
posting initial margin for institutions with an average all state staff representation laws throughout Germany
total nominal value of non-centrally cleared derivatives incorporate a co-determination right of the staff council
of more than €50 billion (phase 5 entities) to 1 September on short-time working as soon as possible, since this
2021, and for institutions with a corresponding average would allow departments to save jobs by independently
total nominal value of less than €50 billion and more than and temporarily introducing short-time working with their
€8 billion (phase 6 entities) to 1 September 2022. staff representatives.
• We are committed to seriously examining capital markets
regulation (MiFID II/MiFIR, MAD/MAR, Benchmark TAX LAW
Regulation) within the scope of the upcoming reviews • We call for the EU Commission and the German Federal
as to rules impeding efficient capital markets, in a quest Ministry of Finance to postpone the notification duty for
to support a sustainable market recovery following the cross-border tax structuring arrangements (DAC 6) by
COVID-19 crisis. Therefore, we welcome the relief as to twelve months.
information requirements in the securities business
proposed by the MiFID Quick Fix in July 2020 as a first
important step. However, further steps are necessary
to yield effective improvements. In particular, further
reviews should not create new bureaucratic burdens.
PAYMENT TRANSACTIONS
• We deem the suspension of data collection pursuant to
Art. 27 of the EU Payment Accounts Directive (PAD) to be a
useful relief measure.
CIVIL AND COMMERCIAL LAW
• We call for a clarification by the legislator that loan
amounts drawn will continue to bear interest during the
forbearance period.
7CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
1 EU Funding Policy 2021–2027
Since the COVID-19 pandemic breakout, the EU Commission In the new funding period, the funding instruments of
has focused its funding policy on this crisis. Additional first- various EU programmes will be bundled under a new,
aid measures have been single support mechanism – InvestEU. For the first time,
The EU must make funding avail- taken, such as the Corona the EIB Group will be joined by other promotional banks
able to the economy in line with Response Investment as implementation partners that will use the EU budget
demand and quickly, both during Initiative, and have had a guarantee for funding instruments directly. The new
and after the crisis. material impact on the plans overarching programme was created to mobilise additional
for the new funding period. investments in key policy areas. To mitigate the impact of
The Multiannual Financial the COVID-19 pandemic and with the subsequent economic
Framework (MFF) for 2021–2027 and the Next Generation recovery in mind, the EU Commission saw fit in May 2020
EU (NGEU) recovery fund for 2021–2024 must be adopted as to increase the budget guarantee provided for InvestEU
soon as possible. from €38 billion to €75.6 billion. In addition to the policy
areas of sustainable infrastructure (1), research, innovation
On 10 November 2020, the EU Member States and the and digitisation (2), SME (3), social investment and skills
European Parliament agreed on a budget: the MFF was (4), a fifth investment window was proposed for strategic
projected at €1,074.3 billion, of which around one-third European investment (5). However, the agreement reached
will be allocated to structural funds, while NGEU is set to between Member States and Parliament on 10 November
hand out €360 billion in loans and a further €390 billion in 2020 differs significantly from the EU Commission's budget
direct grants to those Member States affected particularly proposal for InvestEU. Out of a total of €23.5 billion for
severely by the COVID-19 crisis. Germany intends to make InvestEU, only €9.4 billion will be allocated to the EU
use of grants only. Apart from an additional allocation to budget guarantee. The trilogue on InvestEU will also bring
structural funds in the amount of €2.4 billion in 2021–2022 clarity concerning the policy areas: while the Council
(ReactEU), Germany will receive a projected €22.7 billion wishes to integrate the 'strategic European investment'
from the newly set-up so-called recovery and resilience window into the existing four policy areas, in late October
facility. To help those European regions with the highest 2020 the European Parliament agreed on an additional,
carbon intensity manage the structural changes, a Just sixth policy area for InvestEU to support companies
Transition Fund (JTF) will be created under the Green Deal that have been hit by the COVID-19 crisis and are at a
framework. The allocation to Germany for the 2021–2027 disadvantage (Solvency Support). Against this background,
period is €2.2 billion. The EU structural fund has another the outcome of the legislative procedure remains to be
€16.4 billion earmarked for Germany (excluding rural seen. The funds allocated to InvestEU stand in contrast
development). to the ambitious targets, namely to provide sufficient
OUR POSITION
• We advocate a quick conclusion of the negotiations for the • We call for flexible and combinable financial products
Multiannual Financial Framework, the Next Generation within InvestEU so that suitable support instruments
EU fund, the Structural Funds Regulation as well as the will be available to tackle the challenges arising after the
InvestEU Regulation, in the interests of planning security crisis.
and legal certainty for the 2021–2027 funding period. • We advocate the involvement of national and regional
• We are also committed to ensuring that promotional implementation partners (promotional banks) on an
banks, with the help of structural funds and EU guarantee equal footing with the EIB, by granting them direct access
facilities, will continue to provide support programmes to the EU budget guarantee provided as part of InvestEU.
beyond 2020, thus guaranteeing continuous and reliable
support.
8CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
investment impetus in key policy areas. Furthermore, the MULTIANNUAL FINANCIAL FRAMEWORK AND RECOVERY
German support programmes that rely on European risk PLAN FOR EUROPE (NGEU) – TOTAL VOLUME
protection may be more difficult to realise.
Multiannual Next Generation
Financial €1,074.3 bn EU (NGEU)
Framework COVID-19 recov-
(MFF) ery package,
Seven-year brought forward
budget €750 bn for the first years
€1,824.3 bn
Source: Council of the European Union
ALLOCATION OF FUNDS (GRANTS) PER EU MEMBER STATE UNDER THE RECOVERY PLAN
Italy €81.8 bn
Spain €77.3 bn
France €38.8 bn
Poland €37.7 bn
Germany €28.8 bn
Greece €22.6 bn
Romania €19.6 bn
Portugal €15.5 bn
Bulgaria €9.2 bn
Czech Republic €8.6 bn
Hungary €8.1 bn
Slovakia €7.9 bn
Croatia €7.4 bn
Netherlands €6.8 bn
Belgium €5.5 bn
Sweden €4.7 bn
Austria €4.0 bn
Lithuania €3.9 bn
Finland €3.5 bn
Latvia €2.9 bn
Slovenia €2.6 bn
Denmark €2.2 bn
Ireland €1.9 bn
Estonia €1.9 bn
Cyprus €1.4 bn
Malta €0.4 bn
Luxembourg €0.2 bn
Source: European Commission, Statista
9CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
2 Implementation of Basel IV in the EU
Due to the COVID-19 pandemic, the Basel Committee on of the overall increase can be attributed to the so-called
Banking Supervision (BCBS) has deferred the implemen- output floor, which raises the capital requirements of banks
tation date of the Basel using internal models to at least 72.5 per cent of the value
Proportionate implementation in III framework finalised in calculated using regulatory standardised approaches. With
the EU December 2017 (Basel IV) by an additional burden of about 20 percentage points for Ger-
one year, to 1 January 2023. man banks, this amount turns out to be significantly higher.
The aim is to free up re- In addition, with Basel IV the risk weight for banks that are
sources at the banks and supervisors so that they can cope not rated externally (and whose rating therefore currently
with the crisis. It is foreseeable that the transposition of depends on their own central government’s rating – the
Basel IV into European law will also be significantly delayed. 'country of origin' principle) is set to double to 40 per cent in
The European Commission has postponed the submission standard cases. This would particularly impact development
of a corresponding legislative proposal to the beginning of and promotional banks, as they frequently extend develop-
2021. ment loans via smaller principal banks that have not been
rated by a rating agency.
At the beginning of August 2019, the European Banking
Authority (EBA) submitted its report on the implementation
of Basel IV to the European Commission. In this report, the
EBA forecasts an increase of 24.4 per cent in capital require-
ments for European banks. With regard to German credit
institutions, the EBA actually identified an increase of as
much as around 40 per cent. In the EU, 9.1 percentage points
OUR POSITION
• We are concerned that the new Basel IV regulations will • We are also in favour of maintaining well-founded deviations
hit the banks during the phase following the coronavirus from the Basel Accord even after Basel IV is implemented.
crisis – despite the recently resolved one-year deferral. This applies for example to the SME supporting factor for
In particular, the massive capital increases related to lending to small and medium-sized enterprises, or the
the Basel output floor could dramatically delay the continuation of the EU practice on the treatment of real
recovery of the real economy – or even incur another estate loans.
economic slump. Since the impact of the pandemic is • We would like to point out that the energy turnaround in
not yet foreseeable, the EU Commission should carry Germany (the 'Energiewende') is largely financed by German
out an impact analysis, an exercise to consider the banks. If the European banking industry is burdened as
actual consequences of the crisis, before Basel IV is feared, this raises the question as to whether the EU can
implemented. Only after such an exercise has been reach its ambitious climate and sustainability targets.
conducted should the EU institutions begin to discuss • We advocate that the new regulations concerning treatment
when and how Basel IV is to be implemented within the of claims on banks should not impede the development and
EU. promotional business. Therefore, final borrower receivables
• We believe that in addition to the leverage ratio, the assigned to development and promotional banks within
output floor should be implemented as a second backstop the scope of the Internal Ratings-Based Approach (IRBA)
for risk-based capital backing in the EU. This would reduce should be recognised as collateral; furthermore, within the
the negative impact of the floor. The standardised risk standardized approach all loans provided to banks with the
measurement approaches should also be geared more aim of passing through or granting promotional loans should
towards the actual risks. be generally included with a risk weight of 20 per cent.
10CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
3 Discussion concerning the
European Deposit Insurance Scheme (EDIS)
The ongoing COVID-19 pandemic makes it seem unlikely that A proposal for compromise reached under the Austrian
the negotiations on the European deposit guarantee scheme presidency of the Council of the European Union in late
will yield results in the near future. However, as the EU 2018 gained broad approval.
Commission works to improve the framework for bank crisis This so-called hybrid Objection to the EU Commis-
management and deposit guarantees in 2021, EDIS might approach is based on the sion’s concrete proposals for
gain momentum. re-insurance model on establishing a European Deposit
the one hand, built on the Insurance Scheme (EDIS).
As early as 2015 the EU Commission presented a regulation Commission's proposals,
proposal that included setting up a European Deposit and on a system of
Insurance Scheme (EDIS) within the Banking Union, on a mandatory lending between EU members' national deposit
step-by-step basis: from a re-insurance to co-insurance guarantee schemes on the other. This would mean that in
stage and, finally, a fully-fledged insurance system. As the first stage of a payout event, the individual Member
political consensus on the matter could not be reached, the State's national deposit guarantee scheme would bear the
EU Commission in 2017 proposed a diluted EDIS approach losses. In the second stage, that Member State's national
in its communication on completing the Banking Union. deposit guarantee scheme – prior to defaulting – would first
According to this communication, EDIS would merely raise extraordinary ex-post contributions; where this is not
provide liquidity coverage in a first re-insurance stage. possible, or not to a sufficient extent, EDIS liquidity could
Only at a later point would losses from national deposit be accessed. Should the second-stage funds not suffice,
guarantee schemes be taken over (limited co-insurance). national deposit guarantee schemes across the EU would
The third phase – fully-fledged insurance – would be be required to provide liquidity in the third stage. The latter
deferred, but not dropped altogether. situation would lead to a departure from the current model
of voluntary support.
OUR POSITION
• We advocate taking great care during the COVID-19 crisis • We do not see a legal basis for the Commission's draft
concerning decisions of major significance such as the regulation: it constitutes a breach of the subsidiarity
introduction of a European Deposit Guarantee Scheme. principle and does not comply with the principle of
Uncertainty amongst depositors must be avoided at all proportionality. No comprehensive impact assessment
costs. has been published to date, thus breaching the principle
• We maintain our objections to the Commission's concrete of “Better Regulation”.
proposals for EDIS. Whilst a deepening of the Banking
Union is only conceivable after successful implementation
of risk-reducing measures, it must not threaten the
viability of tried-and-tested German deposit guarantee
schemes. Regardless of the specific structure of the
scheme, the prerequisites to be fulfilled before such
a scheme can be established are crucially important.
We therefore object to mandatory lending between EU
members' individual national deposit guarantee schemes.
11CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
4 Development of banks'
internal risk management process
The German Federal Financial Supervisory Authority number of basic concerns of the banking industry, that had
(BaFin) was quite generous in its use of the margins of been expressed beforehand, were not taken into account. By
interpretation of the way of example, the draft version provides for expanding the
Enshrining the principle of Minimum Requirements for scope of application for specific requirements for systemically
proportionality more firmly at a Risk Management (MaRisk) important financial institutions to include so-called 'large and
European level; principles- rather during the COVID-19 crisis, complex financial institutions'. According to the draft, these
than rules-based requirements; granting institutions some institutions must observe the Basel requirements regarding
retaining banks' flexibility to leeway. A flexible MaRisk risk data aggregation and must not combine their compliance
optimise their value chain. interpretation is an option function with risk control tasks.
for BaFin because it is a
principles-based circular On 29 May 2020 the European Banking Authority (EBA)
that largely dispenses with published its Guidelines on Loan Origination and
detailed provisions. This Monitoring, which are set to be implemented in Germany
focus on principles allows institutions to take the special with the seventh amendment to MaRisk as from April
characteristics of their business model into account when 2021. There is reason to fear that implementation of these
implementing the requirements under normal circumstances. Guidelines will be difficult, since they are not sufficiently
And it allows supervisory authorities to react to challenges principles-based. BaFin agreed under the ‘comply-or-
quickly and flexibly – in particular in times of crisis – without explain’ principle to apply these Guidelines by 30 June
having to adapt the underlying regulations. 2022, whereby a decision to forego the application
must be explained by the relevant authority. Should the
Internal risk management processes within banks are subject implementation of these Guidelines via MaRisk fail due
to constant adaptation, also in times of crisis. On 26 October to being overly detailed and not sufficiently principles-
2020, BaFin launched the consultation on its draft version based, the Guidelines would also apply directly to the less
for the sixth amendment to the MaRisk. Unfortunately, a significant banks.
OUR POSITION
• We believe it indispensable that supervisory practice • We advocate that institutions of all sizes should continue
be principles-based, as the coronavirus crisis has to be able to combine their compliance function with
vividly confirmed. The supervisory authority should other functions of the second line of defence. Size should
emphasise that the principle of proportionality – proven not play a role here, in order that reasonable synergies
in Germany – should not be allowed to fail due to overly- can be leveraged, e.g. for managing non-financial risks.
narrow provisions. We further expect the supervisory Such a limitation is not rooted in the EBA Guidelines on
authority to continue to translate European requirements Internal Governance.
appropriately into its administrative practice. • We would like to highlight that institutions must
• We do not consider it justified to burden large institutions optimise their value chain for profitability. The regulatory
that are not classified as systemically important with restrictions of outsourcing solutions, which are being
additional risk data aggregation requirements. Even the constantly intensified, are increasingly hampering these
ECB regards these precepts as a mere guide for its ongoing efforts. It is our belief that supervised entities that act
supervisory activities to encourage implementation at as service providers for the institutions and certified
important institutions while safeguarding proportionality. service providers should receive preferential treatment to
facilitate outsourcing management.
12CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
5 MiFID II / MiFIR review
The revision of the Markets in Financial Instruments venues (best execution reports). Adoption of the Quick Fix
Directive (MiFID II) and the Markets in Financial Instruments is scheduled for year-end 2020.
Regulation (MiFIR), officially began on 17 February 2020 with
the consultation published by the European Commission. MiFID II/MiFIR will be The pending revision of MiFID II
Previously we, together with the German Banking Industry further revised in 2021, and MiFIR is equally important
Committee (GBIC) had presented numerous positions in with new, comprehensive for both investors and the finan-
need of amendment to the German Ministry of Finance requirements already cial sector. The MiFID Quick Fix
(BMF). evident. Specifically, within the Capital Markets Recov-
these concern reporting ery Package brought forward one
On 24 July 2020, the EU Commission brought forward requirements or pre- and part of this review.
the revision of part of the MiFID II rules within the scope post-trade transparency (key
of the so called Capital Markets Recovery Package (MiFID word: consolidated tape).
Quick Fix). Reducing bureaucratic requirements will allow
investment firms and banks to free up resources to cope
with the consequences of the COVID-19 pandemic, and
help companies raise capital on the financial markets. The
alleviations particularly include exemptions from certain
information requirements for transactions executed
with professional clients and eligible counterparties, as
well as the switch to client information being provided
in electronic format. In addition, corporate bonds with
make-whole clauses are to be exempted from the product
governance regime. Last but not least, we proposed to
suspend the quaterly reporting requirements for trading
OUR POSITION
• We welcome the MiFID Quick Fix and the objective to • We welcome the planned suspension of trading venues'
simplify the securities business by reducing bureaucratic quarterly reporting. Suspending investment firms' annual
requirements for banks and investors. That applies in execution reports would also be preferable. Both pieces of
particular to the exceptions intended for transactions with information have proven hardly relevant for the market,
eligible counterparties and professional clients, where but are very costly.
further exemptions and the waiver of so-called ‘opt-in’ • We oppose the introduction of a comprehensive
rights of professional clients would be preferable. consolidated tape. The poor experience gained with
• We welcome the proposed exemption of corporate bonds the new MiFIR transparency rules (especially pre-trade
with make-whole clauses from the product governance transparency for non-equities, best execution reports),
requirements. In our opinion, said bonds should also resulting in enormous, yet hardly usable data collections,
be exempted from the PRIIPs Regulation and the make it difficult to see any benefit in a further data
corresponding documentation requirements. We continue collection centre (consolidated tape). Any relief achieved
to advocate exemption from the product governance for institutions by introducing the amendments of the
regime for other 'plain-vanilla' financial instruments such MiFID Quick Fix would then be thwarted by negative
as equities and bonds, with potential exceptions not being consequences elsewhere.
limited to execution-only business. This business model is
virtually non-existent in Germany.
13CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
New
6 Bundesbank refinancing programmes
A second coronavirus wave has hit Europe. Many companies As was the case during the first wave of the pandemic, banks
are faltering as they enter the winter term, having to resort again are at the risk of not only being a part of the solution,
to existing deposits and but also a victim of the crisis – if corporates and institutional
A sustainable economic recov- credit lines with banks to a investors transfer their term deposits to current accounts, or
ery requires adjustments to considerable extent. Once withdraw them completely.
the Bundesbank's refinancing again it is paramount to
programmes. help as many companies At the same time, the ongoing economic impact of the
as possible with an pandemic – and the fact that the hoped-for upswing has not
otherwise sound business materialised – will continue to put pressure on corporate
model through this second phase of the crisis. credit quality. Numerous companies could then fall out of the
Bundesbank's collateral framework. In this case, banks would
Corporate credit demand has posted another increase, be unable to exchange existing and new loans for central bank
according to the Bank Lending Survey (BLS), conducted liquidity with the Bundesbank. Given the lack of alternatives,
amongst German banks and published by the German banks would then be forced to manage their credit books
Bundesbank on 27 October 2020. This is especially evident with an even more cautious and price-sensitive approach.
in the German economy, with its strong SME presence that
benefits only to a limited extent from the ECB's purchase The banks' aim is to support those corporate clients that
programmes for capital markets-refinanced companies. An offer a sound business model with the necessary funding,
inadequate, sluggish or overly expensive credit supply could but whose credit quality has been adversely affected by the
put the German economy at risk, or inflict unnecessary measures taken to contain the pandemic. Companies must
damage. not be put under additional pressure through bank lending
that is inadequate, too slow or overly expensive.
OUR POSITION
• We advocate support for the credit supply to the economy • We advocate that, with regard to the eligibility of
from the Bundesbank, via Germany's banks, to the best of credit claims from corporates (also within the scope
its abilities – and, as a first step, lifting the time limitation of the existing loan submission programme) – both
on refinancing programmes. the speed and predictability of acceptance decisions
• We advocate the further implementation of the by the Bundesbank should be optimised – and that
Correspondent Central Banking Model (CCBM), as this internal ratings of the institutions or banking networks
would make it easier to provide funding to institutions. In become applicable. Especially companies of the German
particular, implementing the programme with the Banque Mittelstand, the driving force of Germany's industrial base,
de France is overdue. generally do not have a rating from one of the major credit
rating agencies (e.g. Moody's, Fitch, S&P).
14CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
7 Reform of digital competition law (Act against
Restraints of Competition/Digitalisation Act)
Against the background of the current digital challenges In addition, the existing regulatory system for competition
emanating from the COVID-19 crisis and the resulting law in Germany is being tightened up in certain areas with
acceleration in the provision of digital services, it is the modernisation of abuse
becoming increasingly important to amend competition control under competition The draft bill for the 10th amend-
law. How the law is set out in the digital area will have an law, the establishment of ment to the German Act against
impact on the overall framework for a significant part of the concept of "intermediary Restraints of Competition ("GWB
the economy and the functioning of digital ecosystems in power" and the revision Digitalisation Act") adapts com-
Germany and Europe. of the "Essential Facilities petition law to the challenges
Doctrine". A new element that digitalisation brings.
On 9 September 2020, the German government approved will be introduced to enable
the draft bill for the 10th amendment to the German Act more effective control over
against Restraints of Competition, providing a focused, the digital companies that are of paramount significance for
proactive and digital "Competition Law 4.0", also dubbed competition across markets. A right to data access under
the "GWB Digitalisation Act". The law in question has been competition law will be introduced in cases where access to
under debate in the German parliament since the end of data is of particular importance from a competition point
October 2020. The new law will seek to implement the EU of view. Additionally, an intervention mechanism to reduce
directive on strengthening Member States' competition competition issues caused by market "tipping" will be
authorities. It includes changes to the investigative powers included.
of the competition authorities, and the penalties for violating
competition laws. Competition authorities' proceedings will In future, companies will, under certain conditions, be
be speeded up and will include ordering interim measures, entitled to a decision by Germany's antitrust authority
holding oral hearings, and granting access to files. The draft (the Federal Cartel Office or Bundeskartellamt) within six
bill is expected to be made law by 4 February 2021. months.
OUR POSITION
• We welcome the amendment's objective of creating an charge market-based fees for access to data and services
appropriate regulatory framework, for digital markets in to support investment and innovation. This forms the
particular. In light of the ongoing coronavirus crisis, there basis for the success of Open Banking and Open Data. In
is a strong need for clear competition rules for digital order to access interfaces, standard interface accesses
service providers. and templates need to be defined and applied. The
• We welcome the newly created entitlement for companies compulsory use of proxy accesses encourages the tipping
to receive a decision from the Bundeskartellamt. We effect.
believe, however, that the requirements, namely a • We welcome the fact that a legislative reference to
substantial legal or economic interest in such a decision, uniform technical standards and formats will mean
are too high. that openness to competition, which is desirable from
• We particularly regard the harmonised definition across the point of view of competition law, can actually have
the EU of what constitutes a relevant market as an the desired effect. Harmonisation of the competition
important basic requirement for the practical application law framework for the entire EU internal market is
of this new competition law. subsequently necessary in order to avoid creating
• We fundamentally support the demands for equal legislative arbitrage.
access to interfaces and services provided by major
digital providers. We believe that, in order to create new
ecosystems, it is necessary for providers to be able to
15CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
8 Digital payments and open banking
In its Retail Payments Strategy, the EU Commission has application of an immediate value date are not standard
announced the mandatory introduction of instant payments, requirements, and they are neither necessary from a business
since coverage in the point of view nor sensible from a technical point of view.
Germany and Europe's future European Union pursuant Accessibility for instant transfers in Europe is currently
global competitive positioning to the SEPA Regulation will limited; this must change. TIPS (TARGET Instant Payments
will be dependent on the suc- not be achieved even after Settlement) is to serve as a central hub for all clearing houses
cessful progress of digitalisation. November 2020. Specialist and direct participants, ensuring that instant payments
In this, the regulatory environ- institutions that have not become reachable all over Europe.
ment and successful market taken up instant payments to
initiatives are paramount. date, such as development With all direct TARGET participants set to be obliged to
and promotional banks, focus open a TIPS account, settling instant payments becomes
their business activities on more complex, in particular for large institutions already
their development/promotional mandate, through targeted connected to a commercial clearing house, as various clearing
programmes. Releasing development and promotional banks accounts will be required. This creates indirect pressure on
from the obligation of supporting instant payments is not in banks to switch from their commercial clearing provider
contradiction to the rollout necessary across the European to the public TIPS system. Market distortions could be the
Union for banks to offer viable services. The EU Commission result. The Berlin Group is a pan-European initiative for the
is now examining which specialist institutions will be exempt standardisation of open banking transactions. The banking
from an instant payment obligation. industry has an interest in setting up a premium API system
that is based on selected transactions of the Berlin Group.
Which payment instrument or payment type suits best Such a system would create opportunities for banks and
depends on the needs of the market. For some purposes, it businesses, laying the groundwork for a European ecosystem
may be an instant payment, for others it may be a standard of financial services. At the same time, the EU Commission
transfer. For companies, it may be an instant or standard has announced that a new legislative proposal for an open
batch file transfer. Instant execution of a payment and finance framework, which is set to go beyond the scope of
PSD2, will be presented by mid-2022.
OUR POSITION
• We call for specialist institutions such as development • We call for the regulatory open finance framework to not
and promotional banks to be exempted from a restrain functioning market initiatives. Providers of data
mandatory introduction of instant payments. Payments and services must be able to charge a non-regulated fee to
traffic must not be further regulated, and must be companies that gain an economic advantage, calculated at
oriented towards market needs. Instant payments arm's length. This is a prerequisite for fair competition and
can complement other payment methods. The TIPS for investments in innovative open banking and open data
system launched by the Eurosystem for clearing instant infrastructures.
payments should not force TARGET participants who • We support the amalgamation of banking payment systems
are already connected to TIPS via a clearing house to into a single offer for all payment channels. This requires
add another TIPS account. This would be a market- the support of policymakers and competition authorities. A
based approach that creates accessibility and meets the pan-European payments solution requests a stable regulatory
requirements of the SEPA Regulation. The planned access environment that supports sustainable business models.
of non-banks to infrastructures that are subject to the • We call for less regulatory intervention in the market so that
EUR Settlement Finality Directive (such as TARGET) must European payment systems suffer no disadvantage as they
not endanger stability. We caution against less regulated compete with international platforms and banks.
market participants receiving access to these major
infrastructures.
16CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
9 Requirements for banks’ IT environment
Cyber resilience and information security are central for example for cloud services. At the end of September
supervisory and legal requirements for institutions and 2020, the European Commission submitted a legislative
ICT infrastructures in the financial sector. To ensure that proposal on digital
business operations run smoothly, secure IT operations and operational resilience as BAIT amendment increases
comprehensive contingency management are particularly part of its Digital Finance requirements. Additional regu-
important. Package, including lations and provisions are to be
numerous detailed expected in the medium term as
Up until the end of November 2020, the German Federal regulations on ICT security a result of the planned European
Financial Supervisory Authority (BaFin) will be consulting risk management (incl. regulations on digital operational
on its amendment to the 'Supervisory Requirements testing), on incident resilience.
for IT in Financial Institutions' (BAIT), with which the management and reporting,
European Banking Authority's (EBA) provisions regarding and on ICT contingency
ICT and security risk management in particular are management, all of which are to be further specified for
being implemented – for example in the new chapters an implementation into Regulatory Technical Standards
'Operational information security' and 'IT contingency (RTS) by the EBA. The draft regulation also stipulates a
management'. Since spring 2020, the supervisory authority supervisory framework for critical ICT service providers,
and the associations of the German Banking Industry such as major cloud providers. All in all, the EU Commission
Committee (GBIC) have been intensively and continuously aims to harmonise existing and supplementary regulations
exchanging views on the BAIT amendment in BaFin's expert on improving cyber resilience and ICT security risk
panel on information technology. Within the scope of the management in the financial sector. In particular, the future
public consultation, the GBIC is now aiming to submit a final participation of national supervisory authorities such as
joint statement. BaFin in supervision and supervisory practice also plays an
important role within the regulations.
The 'Cybersecurity Act' was adopted as early as in 2018 in
the EU; it aims to improve cybersecurity via certifications,
OUR POSITION
• We generally advocate clear requirements providing proportionality is no longer given real consideration. The
simplification – at a European and national level – planned regulations would apply equally to all banks,
particularly for ICT security risks and IT outsourcing. We without any differentiation.
therefore also support the certification of selected IT • We advocate a clear legal framework, to comprehensively
products or services (for example, through the optional include national supervisory authorities in future supervision
certification of cloud services in the case of outsourcing). and supervisory practice, in the European Commission's
However, we reject the obligatory certification of (security- draft regulation on operational resilience. Only the national
relevant) products and services. This would limit the competent authorities are capable of adequately assessing
selection of products available. individual circumstances and connections.
• We call for a consistent application of the principle of • We welcome the European Commission's plan to establish
proportionality, as set out in MaRisk and BAIT; this also a supervisory framework for critical ICT service providers,
includes application within the supervisory authority's especially for major international cloud service providers.
auditing practice. This framework should definitely be accompanied by
• We would like to point out that the planned regulations supervisory relief for financial institutions, e.g. by the
in the European Commission's legislative proposal on service providers' clear obligation to provide proof that
digital operational resilience go significantly beyond in rendering their services they are complying with all
the harmonisation target, and that the principle of requirements.
17CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
New
10 Digital euro and crypto-asset regulation
Ever since the Libra private sector currency project was form a digital euro project will be launched. A Bundesbank
announced in 2019, there has been growing debate about working group – involving private and public-sector banks
the introduction of a digital – will assess various models for a digital euro through to
The European Commission euro. There can be no the end of 2020. The ECB is looking into the possible direct
has published a proposal for doubt that the use of smart issuance of a digital euro to end-users using a payment
a wide-ranging EU regulation contracts, for example, function. A concrete variant of a digital euro has not yet
covering crypto-assets. The is essential for ensuring been defined. In view of the potential risks for financial
European Central Bank is driving the further development and monetary stability, the German Bundesbank believes
forward discussions on the of financial services and that, for the time being, token-based cash should be
creation of a central bank digital business models in the implemented exclusively in digital form for use by citizens
currency. European financial sector. and businesses for their retail payments.
European digital central As part of its "Digital Finance Package", the European
bank money, or central Commission published a proposed regulatory framework
bank digital currency (CBDC), should also be seen as a for markets in crypto-assets at the end of September
competitive counterbalance to Libra and other international 2020. It aims to create a clearly defined legal framework
digital currency projects. In October 2020, the ECB launched for harmonising the regulation of crypto-assets across the
a public consultation to help it decide whether to adopt a EU. The draft bill contains regulations for what is so far a
digital euro, based on its recent "Report on a digital euro". largely unregulated area and, following the "same risk, same
The report sets out the requirements for a digital euro and rules" approach, also sets out clear requirements on the
the framework for digital central bank money, and will be issuance of "stablecoins" in the EU. According to the draft,
used as a starting point for developing an ECB concept the regulations are expected to enter into force 18 months
which may be implemented in the future. A decision will following publication in the Official Journal, which means
be taken midway through 2021 as to whether and in what from the end of 2022.
OUR POSITION
• We are committed to a digital euro where banks have a • We fully support the proposed use of future regulated
clearly defined role to play in order to minimise potential crypto-asset instruments without a separate license for
risks while maintaining the ECB's supervisory role. CRR institutions, as set out in the EU'S draft legislation
• We believe that it is necessary to preserve the current to regulate crypto-assets. This should also apply to
dual monetary system of cash and wholesale central institutions operating under a similar supervisory
bank deposits even if a digital euro were to be adopted. framework, such as those that are subject to the German
This would allow banks to continue to offer custody of Banking Act and not to the CRR. This means that in the
client funds and safeguard credit supply. Another option future, German development and promotional banks
is to make digital cash directly usable for those using should likewise be able to use appropriate instruments
programme platforms and smart contracts. without encountering any additional hurdles.
• We are extremely wary about the ECB’s discussions on • We underline the importance of the exemptions from
CBDC account management for (retail) clients. The ECB the scope of the proposed legislation to regulate crypto-
should not get involved in retail banking services, given assets, such as the exemption for financial instruments as
its central role in maintaining financial and monetary defined in the Markets in Financial Instruments Directive
stability. (MiFID), since its provisions are both comprehensive and
• We support the creation of a clearly defined legal sufficient. It is essential that any overlap or "duplication of
framework for harmonising the regulation of crypto- regulation" is avoided.
assets across the EU.
18CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
New
11 Digital securities
In August 2020, the German government published a issued and managed via distributed ledger or blockchain
proposal on the introduction of electronic securities technology. Regulation of electronic securities will be
(eWpG), which aims to modernise German securities law technology-neutral and
and to generally open up German legislation to electronic be subject to established The German Federal Ministry of
securities. In a first step, implementation of the proposal is supervisory legislation. The Justice and Consumer Protec-
limited to electronic bearer bonds, whereby paper-based supervisor in charge will be tion and the German Ministry
certificates will be replaced by digital securities entered the German Federal Financial of Finance published a draft bill
into the electronic securities register. The eWpG does not Supervisory Authority (BaFin). on the introduction of electron-
aim to abolish traditional securities; they will co-exist with ic securities in August 2020; in a
electronic securities. Under certain conditions, and without We dealt with the regulation first step, bearer bonds will be
difficulty, it should be possible to convert traditional of electronic securities early digitalised.
securities into electronic securities by entering them into on, and in autumn 2019 we
an electronic securities register. Likewise, the reverse drafted a VÖB position paper
procedure is to be possible. that formed the basis of initial discussions between VÖB,
the Federal Ministry of Justice and Consumer Protection,
Electronic securities registers can be maintained centrally the Federal Ministry of Finance and the Hesse Ministry of
or decentralised. Central securities registers should only Finance. The proposal implements various VÖB demands. In
be managed by approved central securities depositories. particular, the gradual implementation of digital securities,
Electronic securities will be issued by way of collective starting with bearer bonds and adding equities and
registration. Transfers of these electronic securities will investment fund units at a later point, can be traced back to
continue to be recorded in the traditional book entries, our VÖB position paper. In September 2020, as part of the
and managed by the securities depository as a trustee. German Banking Industry we drafted a joint statement and
In decentralised securities registers, bearer bonds are worked to ensure that this statement took a positive stance
on the draft law.
OUR POSITION
• We expressly support the legislative proposal. Electronic • We welcome the technology-neutral structure, which
securities have already been established in various leaves room for future technological innovations without
neighbouring countries, such as France and Luxembourg. having to amend the law.
The German financial sector should also be able to make • We believe that maintaining traditional paper-based
use of electronic securities. securities alongside digital securities is the right way to
• We aim to achieve a swift implementation of the move forward, providing flexibility and ensuring a smooth
legislative proposal: we therefore call for equities and transition.
fund units to be digitalised at a later stage – contrary
to fund industry requests – since this would require
time-consuming and comprehensive reforms, e.g. of the
German Securities Deposit Act (DepotG).
19CURRENT POSITIONS ON THE REGULATION
OF BANKS AND THE FINANCIAL MARKETS
12 Sustainable finance
The EU Commission sees the COVID-19 pandemic as a ESMA also consulted on requirements for including ESG
"sustainability crisis", which is why the pandemic features factors when providing investment advice. A Delegated Act
prominently in the amending MiFID II accordingly is expected for the near future.
What needs to be done: integrate Commission's renewed The EU Commission has also consulted proposals for an EU
market-based solutions in a sustainable finance strategy Green Bond Standard. The EU Ecolabel for green financial
European context – implement expected for late 2020. products is set to follow. How to define sustainability-related
a pragmatic taxonomy for green Consultation on this renewed risks – and their inclusion within the capital adequacy regime
finance products, embedding strategy commenced in and the Supervisory Review and Evaluation Process (SREP) –
this into risk management using spring of 2020. is the subject of intensive discussion. In December 2019, the
a measured approach. German Federal Financial Supervisory Authority (BaFin)
The aim of sustainable issued a Guidance Notice on Dealing with Sustainability
financial management is to Risks; in May 2020, the ECB published its Guide on Climate-
further channel capital flows into socially responsible and related and Environmental Risks for consultation. The
environmental investments, to better manage sustainability EU Commission plans to publish a proposal on the review of
risks and to integrate environmental, social and governance non-financial reporting requirements by no later than early
(ESG) aspects more effectively into decision-making processes. 2021. Regarding disclosure requirements for companies, the
The EU regulation on sustainable finance centres around the Taxonomy Regulation was faster: it is applicable to non-
Taxonomy, an EU-wide classification system that entered into financial statements already for the 2021 financial year. In the
force in July 2020 and will be applicable as from 2022. first quarter of 2021, the EBA will also conduct a consultation
procedure concerning the Implementing Technical Standards
The requirements for the integration of ESG factors in the (ITS) on the Pillar 3 disclosure of prudential information on ESG
investment process, including their disclosure (applicable risks. Last but not least, the EU Commission plans to adopt a
as from spring 2021) and the structure of sustainability legislative proposal on sustainable corporate governance in
benchmarks entered into force as early as December 2019. 2021, and has published a questionnaire in preparation thereof.
OUR POSITION
• We are in favour of taking sustainability considerations • We welcome the EBA's proposal of a sequenced,
into account in long-term economic stimulus programmes harmonised approach to ESG factors. Only then should
that are launched to support the German economy, not possible requirements for the SREP be considered. In this
least against the background of the current COVID-19 context, we advocate longer implementation periods.
crisis. This applies especially to strengthening healthcare Capital relief for green loans must be granted solely on
as well as the establishment of climate-friendly the basis of measurably low risks. We deem the Federal
infrastructures and key industries. Government's idea for guarantees for sustainable funding
• We are convinced that a single classification system and worth considering.
uniform standards for sustainable financial products • We believe that ESG disclosure that is not product-specific
will help increase transparency for investors, reduce belongs in the annual non-financial statement as a general
ambiguities for issuers, and contribute to market growth rule. The extent of this disclosure should follow the risk
and financial stability in the long term. management. Principles-based global disclosure standards
• We advocate consideration of the special characteristics should be striven for.
of the German credit market as well as of SMEs when • We are convinced that a sector-specific transition period,
defining the transparency obligations that banks will have together with economic, environmental and fiscal policy
to fulfil under the Taxonomy. Thresholds may dramatically support, are necessary to bring about a lasting change in
increase viability. the economy.
20You can also read
