Financial Stability, Financial Services and Capital Markets Union Regulation: Impediment or incentive for SME financing? Niall Bohan DG for Financial Stability, Financial Services and Capital Markets Union Head of Unit Unit D1- Bank Regulation and Supervision 1/12/2014

Financial Stability, Financial Services and Capital Markets Union Proud tradition of Coop and Savings banks: Cooperatives and savings banks must be well capitalised - not despite but - because they are so important for the real economy! 1/12/20142 Savings and cooperative banks play important role in financing the real economy - SME, regional and rural development, important part of local infrastructure; Cooperative and savings banks add to diversity of banking sector:

Financial Stability, Financial Services and Capital Markets Union Strong regulatory response to crisis: Capital not sufficiently loss absorbing, liquidity management inadequate, model risk, wrong incentives in remuneration packages: CRR requires more and better capital, introduces rules on leverage, liquidity + remuneration National supervision vs. European banking structures: Banking union created integrated supervision at European level Insufficient crisis management tools to deal with ailing large banks: BRRD and SRM and proposals on structural separation address "too big to fail". 31/12/2014

Financial Stability, Financial Services and Capital Markets Union Cooperative & savings banks not spared in crisis −Some large European cooperative and savings banks suffered significant losses; −Several cooperative banks - in Austria, France, Italy, Cyprus - received government support; −Savings banks networks e.g. in Spain had to be restructured; −Comprehensive assessment identified a number of savings and cooperative banks inter alia which require recapitalisation. 1/12/2014

Financial Stability, Financial Services and Capital Markets Union Balancing equal treatment & proportionality Where banks run business lines giving rise to risks, they must comply with relevant safeguards; Recognition for policy choices in CRR/CRD4 in support of some activities: (SME factor benefits eligible loans regardless of lender); Proportionality (art 5(4) TEU): EU banking rules take account of specificities of European banking sector – in particular of cooperatives, savings banks, mutuals; No single model of cooperative, savings banks – full spectrum from stakeholder to shareholder. 51/12/2014

Financial Stability, Financial Services and Capital Markets Union Specific recognition in EU law: examples (1) Capital: o Definition of capital: cap, multiple dividends, redemption; o Special rules for decentralised banking structures: −networks in which banks are permanent permanently affiliated to a central body; −banks connected via institutional protection schemes; −banking groups with cross-guarantee schemes in place; Remuneration: rules accommodate coops unable to pay variable salary to managers. 61/12/2014

Financial Stability, Financial Services and Capital Markets Union Specific recognition in EU law: examples (2) Liquidity: recognition of certain intra-group exposures; Leverage ratio disclosure: exemption for intra-group exposures; Structural separation: special provisions for decentralised banking strutures; BRRD: waiver from requirement to provide resolution plans for local entities in decentralised banking structures (central plans); Resolution Fund contributions: liabilities of IPS members excluded from the basis for calculating contributions under certain conditions; IPS membership mitigating factor in the risk-adjustment mechanism. 71/12/2014