Robust regulation is not an impediment for jobs and growth, consultation raises concerns, says Finance Watch

Brussels, 1 February 2016 - Finance Watch, the public interest advocacy group, has submitted its response to the European Commission's call for evidence on the regulatory framework for financial services.

Finance Watch's Secretary General, Christophe Nijdam, made the following comment on the consultation:

"We are concerned that the framing and the timing of this consultation will lead to a weakening of the EU's regulatory framework.

"Much regulation from the previous legislature has not yet been implemented, raising questions about why a stock taking exercise is being conducted now.

"By asking for empirical data and concrete evidence, the consultation creates an in-built bias towards the financial industry which holds most of that data, potentially deterring or excluding citizens and other stakeholders.

"The framing of the consultation seems to pose a fallacious trade-off between financial stability and growth, in which regulation that improves stability is presumed to be bad for growth. Worryingly, last October's consultation on the possible impact of the CRR and CRD IV on bank financing of the economy was similarly framed, presenting an incorrect trade-off between risk and growth. In our view, financial stability is not a growth impediment but a pre-requisite for sustainable growth in the wider economy."

Instead of already taking stock of regulation which has not even been implemented, Finance Watch calls on the European Commission to:

  • Complete Bank Structure Reform to address moral hazard;
  • Curb the excessive complexity of bank prudential regulation and the preferential treatment of large banks over small ones by addressing the well-known issues of the IRB approach and giving a more prominent role to simpler and more robust metrics such as the leverage cap;
  • Address key factors of systemic risks such as interconnectedness through macro-prudential regulation.

With this agenda, the Commission would be creating the right environment for long-term sustainable growth and jobs.

Finance Watch will continue to reiterate these points at future consultative occasions, and will continue to ask policy-makers to adopt this agenda.

Download Finance Watch’s consultation response


ENDS

For further information, please contact

Charlotte Geiger at +322 (0) 880 0441

Greg Ford at +44 (0) 7703 219 222

 

NOTES

The extended deadline for the consultation, “Call for evidence: EU regulatory framework for financial services”, was 31 January 2016. The consultation webpage is here: 

http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/index_en.htm

The Commission used the consultation to ask for empirical evidence and concrete feedback on rules affecting the ability of the economy to finance itself and growth; unnecessary regulatory burdens; interactions, inconsistencies and gaps; and rules giving rise to unintended consequences, with the aim of gaining a clearer understanding of the interaction of the individual rules and the cumulative impact of the legislation as a whole including potential overlaps, inconsistencies and gaps.

The webpage and summary of responses to the Commission's earlier consultation, "Possible impact of the CRR and CRD IV on bank financing of the economy", which closed on 7 October 2015, is here:

http://ec.europa.eu/finance/consultations/2015/long-term-finance/index_en.htm

Finance Watch's response to the CRD consultation can be downloaded here.