“It’s important to think beyond the Covid-19 crisis”

30 June 2020

vdp Chief Executive Jens Tolckmitt on Germany’s EU Presidency.

Pfandbrief banks advocate a critical review of major regulatory projects in order to continue giving priority to the supply of credit to overcome the crisis

The Association of German Pfandbrief Banks (vdp) welcomes the priorities defined by the German federal government for Germany’s presidency of the EU Council which starts on 1 July 2020. At the same time, the vdp calls on the federal government to undertake a critical review of major regulatory projects during its presidency, so that banks can continue to focus their capacities wholly on supplying credit to the real economy.

"Germany’s EU Presidency will be marked by the fight against the economic crisis triggered by Covid-19. There is an express political desire for banks to provide the real economy with sufficient credit to overcome the crisis. But they must also be given the ability to do so,” says vdp Chief Executive Jens Tolckmitt. “Therefore, now is not the time for major new regulatory projects, not even as a result of the EU Green Deal, which has been declared a priority but would place a heavy administrative and cost burden on the banking industry.”

Rather, the aim should be to take pressure off banks through targeted regulatory relief, as was pragmatically implemented in some areas immediately after the Covid-19 crisis hit.

“It’s also important that supervisors and politicians think beyond the current crisis and continue to pursue ongoing regulatory projects, but also critically review them in the light of current experience,” explains Tolckmitt.

From the Pfandbrief banks’ perspective, the main issue is the European implementation of Basel III. The EU should not go beyond the agreement already reached in Basel, to avoid unnecessarily limiting banks’ scope for action here too.

Finally, the vdp believes the current crisis clearly shows that, as a result of much stricter regulatory requirements since the financial crisis, banks are now much more resilient and crisis-proof than they were ten years ago.