Yesterday, the European Parliament adopted the so-called “CRR quick fix”, a far-reaching softening of the capital adequacy rules for banks in the Corona crisis. Since Socialist rapporteur Jon\u00e1s Fern\u00e1ndez has secured the approval of the Council of Ministers for the legislative proposal upfront, it will enter into force promptly.<\/p>\n
The decision was taken with the votes of Christian Democrats, right-wing Conservatives, Liberals and Social Democrats. We Greens voted against the proposal because we believe that it is highly unbalanced. Accompanying conditions would have been needed to ensure that the relief granted would benefit the financing of the real economy. In particular, we have argued for a binding suspension of dividends and interest payments on so-called CoCo bonds (“contingent convertible bonds” or “AT1 instruments”). Due to the imbalance of the legislative proposal in favour of the banks, not only the Left but also some Socialist MEPs voted against the report of their own rapporteur.<\/p>\n
The proposals are intended to prevent accounting provisions for expected credit losses (under the new accounting framework IFRS 9) from reducing banks\u2019 equity in the Corona crisis. We Greens have been fighting this change in accounting rules for years because of their excessively procyclical effects. In addition, temporarily non-performing loans are to be exempted completely from the minimum rules for provisions (\u201cNPL prudential backstop\u201d) if they are covered by a state guarantee. This will initially make possible losses \u201cinvisible\u201d. The application of the new rules on the leverage ratio is to be postponed by one year, as also agreed in the Basel Committee on Banking Supervision. Central bank reserves should be excluded from the leverage ratio in times of crisis and book losses on holdings of government debt instruments should temporarily not affect regulatory capital.<\/p>\n
MEP Sven Giegold<\/strong>, financial and economic policy spokesperson of the Greens\/EFA group in the European Parliament and Green shadow rapporteur for the “quick fix”, commented:<\/p>\n “The amendment of the capital adequacy rules adopted yesterday by the European Parliament is unfortunately a pure gift package to the banks without any conditionality. Instead of providing targeted support to European businesses and citizens to help them overcome the corona crisis, the package merely props up bank shareholders and risk investors.<\/em><\/p>\n