Banks' Warnings Gain Hill's Attention in Regulatory Review

  • EU Commissioner gives preview of bank regulation consultation
  • Responses focused on liquidity, lending, proportionality

The European Union is listening to banks’ complaints that post-crisis regulation thwarts lending and overwhelms small lenders with bureaucracy, the EU’s financial-services chief said.

Those issues show up as most prominent in a consultation which seeks to assess the collective impact of more than 40 pieces of regulation the European Union adopted in the wake of the financial crisis, Jonathan Hill said in Copenhagen on Friday.

“Three themes are emerging from the responses,” Hill said in a speech at the Danish Bankers Association conference. “Respondents argue that in places our legislation is not sufficiently proportionate; that it could be weighing negatively on the amount of financing available to the wider economy; and that the compliance burden is too high.”

While the European Commission hasn’t finished the review of the over 300 responses, Hill said 40 percent of the filings focus on the interaction and unintended consequences resulting from the cocktail of legislation pushed through under Michel Barnier, Hill’s predecessor.

The commission will publish a summary of the responses in April and hold a public hearing in May, Hill said. The overall assessment will conclude by the summer and the evidence will feed into reviews of individual pieces of legislation as well as into new legislation.

“I will make sure that upcoming measures like the net stable funding ratio and the leverage ratio are applied in a way that makes sense for Europe, and that we take account of their implications for liquidity and European businesses,” Hill said.

Hill’s review comes as a part of his broader capital markets union plan, an attempt to boost funding to companies and remove barriers to investment within the EU. It marks a change of tone in Brussels when it comes to financial services, reflecting President Jean-Claude Juncker’s commission’s focus on reviving the EU economy.

“To get the financial crisis under control, we had to legislate at speed,” said Hill. “We succeeded in strengthening the financial sector’s legislative framework. That basic architecture is not in question. But when you’re firefighting, it’s difficult to get everything completely right.”

Before it's here, it's on the Bloomberg Terminal.