The European Commission consults on CRR and CRD IV and on bank financing

Just before the summer break, the EC published a consultation on the effects of higher bank capital requirements under the CRR.

Time to pay back! This is an important consultation, as generally only interested parties (banks) contribute. Unfortunately, in particular academics stay away from these consultations. This is depressing. Given that European academics seldom work for private institutions, they have an obligation to contribute to regulation by sharing the knowledge they acquired (via public means).

Obviously the most interesting question features near the end: Question 14. “Which areas of the CRR could be simplified without compromising the Regulation’s objective of ensuring prudence, legal certainty and a level playing field? Are there areas that could be simplified, but only for specific types of bank or business models? Would it be useful to consider an approach where banks that are capitalised well above minimum requirements or that are less exposed to certain risks could be subject to simplified obligations? What would be the risks with such an approach?”

Your ideas will be noticed, especially if your suggestions look like something that EC regulators could have written themselves. Although I encourage all of you to offer lots of suggestions for simplifications, please offer solutions that the EC can actually implement. At the receiving end are EC regulators, who are people like you and me, in busy jobs and little time to decide. Lofty and wild ideas will probably be canned.

Is that all? Well, the other consultation questions cover a broad range, they address the alleged fall in corporate lending, lending to SMEs, lending to infrastructure, proportionality, and the single rule book.

I told you so. Unfortunately, the consultation will not show definitive answers – especially on the bank lending part. But if all respondents unísonoly submit evidence of banks limiting lending because of the augmented CRR capital requirements, then the result will be … predictable.