ECB says EU banking rule changes must not hurt resilience

ECB: Proposed EU Banking Rule Changes Must Not Weaken Financial Resilience

ECB and SRB Leaders Advise on EU Banking Regulation Reforms

FRANKFURT, Nov 6 (Reuters) - European Central Bank supervisory chief Claudia Buch and Single Resolution Board Chair Dominique Laboureix outlined their recommendations for EU legislators contemplating reforms to prop up banking competitiveness.

The recommendations, published in a blog post in response to an EU Commission plan to rewrite some banking regulation, include both changes to the existing framework and pleas to maintain certain parts of the existing rulebook.

Key Recommendations for Strengthening the EU Banking Framework

1. Establishing a Common European Framework for Deposit Insurance

• Establish a common European framework for deposit insurance as the still missing third pillar of the banking union.

2. Improving Capital and Liquidity Flows Within Banking Groups

• Enable the better flow of capital and liquidity within banking groups. Allowing banks to allocate resources more freely within their groups would improve efficiency in normal times and help them to buffer adverse shocks in a more flexible way.

3. Enhancing Liquidity Arrangements in Resolution

• Strengthen the framework for liquidity in resolution. Credible arrangements to provide liquidity during and immediately after resolution would give authorities and markets greater confidence that a viable bank can continue operating.

Maintaining Resilience and International Standards

4. The Importance of Resilience in Simplification

Learning from Past Crises

• Simplification cannot come at the expense of resilience. The framework has been built on the experience of past crises, and that experience still matters.

5. Adhering to Internationally Agreed Standards

• Simplification should not mean moving away from internationally agreed standards.

6. Preserving Institutional Responsibilities

• Simpler rules should not blur institutional responsibilities. Supervisors and macroprudential and resolution authorities have complementary but distinct mandates.

(Reporting by Balazs Koranyi, Editing by William Maclean)