Continuing international cooperation and consistent regulation
At last year’s Handesblatt European Banking Regulation Conference (22-24 November 2017) Sylvie Matherat gave a speech on the difficulties banks face in uncertain times. She mentioned aspects that would be helpful on the part of the regulatory authorities to improve banks’ ability to act in uncertain conditions. Also, she explained which factors carried the greatest amount of uncertainty for Deutsche Bank. According to Sylvie Matherat, in uncertain times, regulatory authorities can focus on three paths of action.
She identified the first as cooperation. During the financial crisis, she stated, this had worked well and it was still important today for the regulatory authorities to cooperate across borders. Furthermore, she said that consistent regulations as well as their consistent application were important. The fragmentation of international regulatory measures posed a risk. As a third aspect, she mentioned the facilitation of innovation. The legal framework should respond to innovation with flexibility.
The greatest uncertainty for Deutsche Bank, in Sylvie Matherat’s eyes, lay in the EU risk reduction package and Brexit. Her criticism was not so much directed at the complexity of the EU package but the fact that many of the proposals were not even finalised. According to her, the effects of the EU package were not yet visible in their systemic impact, which means that she would like to see unfinalised Basel regulations postponed until their finalisation. Concerning Brexit, she pointed out aspects that have a particular impact on Deutsche Bank. One of them is clearing. The division of the existing infrastructure and the possible selective removal of the comparatively small European share would result in less efficient hedging options and a cost increase for customers, she analyzed.
As yet another aspect, she mentioned personal customer information. To transfer personal customer information from Great Britain without permission meant increased costs for banks and customers, she stated. In her opinion, the cross-border agreement should remain in force for at least another two years. She suggested to consider how long it had taken to adjust to significant changes like EMIR or MIFID and therefore surmised that two years were not too generous a period. In addition, she identified a need for grandfathering existing contracts and transactions.
In conclusion, she summarised that there was no way around living in the uncertain conditions described but there were steps the regulatory authorities could take to manage the associated risks. She called on those authorities to continue their international cooperation, to provide consistent regulations and to calibrate them in such a way as to avoid unnecessary costs. If the regulatory authorities succeeded in this, she said, it could mean a major contribution to supporting the financial system in uncertain times.
Sylvie Matherat is a confirmed speaker for this year’s Handelsblatt Conference “European Banking Regulation”. Meet her on 19-21 November 2018 in Frankfurt, Germany.