Michel Barnier
Commissioner for the Internal Market and Services
Europea Commission
BERL 10/038
200 Rue de la Loi
B-1049 Brussels
Belgium
Reference Nu mber
The Hague
12/11.760/MG
November 12, 2012
Subject
Te lep ho ne Nu mber
VNO-NCW and MKB-Netherlands
response letter to Liikanen
+31 (0)70 3490416
E-Mail
grondhuis@vno-ncw.nl
Dear Commissioner,
The Confederation of Netherlands Industry and Employers (known as VNONCW) welcomes the possibility to give the view of our organisation to the
consultation on the recommendations of the High-level Expert Group on
Reforming the structure of the EU banking sector.
We share the overall aim of ensuring a safe, stable and efficient banking
sector serving the needs of citizens, the economy and the internal market. The
measures which are already finalized and implemented, or are on the way to
be finalized, tackle various causes of the financial crisis. Given the current,
difficult economic situation, it is important that banks can continue to meet
the credit needs of households and businesses. Against this background we
are concerned about the accumulation of the different measures.
In September 2012 we have published an analysis of the effects of the
increase in and accumulation of regulations on the services provided by the
Dutch banking sector. The most likely scenario envisaged in the analysis
leads to – after retaining all earnings to strengthen solvency and liquidity – a
cumulative significant shrinkage of approximately 9% of total assets of the
Dutch banking sector combined with an average price increase in lending of
almost one percentage point. Our analysis shall be attached to our response to
the consultation.
We have strong reservations towards the legal separation of certain
investment-banking activities from deposit-banking activities:
o
it has distortive effects upon bank functions of vital importance to
customers and the economy;
o
it will impact negatively on banks’ ability to lend to the economy;
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o
o
o
it will reduce diversification and synergy benefits of the universal
banking model;
it does not solve the issue of systemic risk;
it will reduce the competitiveness of the Dutch and European financial
sector compared to financial sectors not affected by this
recommendation.
From a macro-economic point of view banks are very important for their
traditional intermediary function of financing the real economy by
transforming savings. Transforming involves matching maturities and risks of
various activities. Universal banks have a wide range of activities, and this
diversity leads to a lower risk profile and more stability. We think separation
leads to hampering the existing synergies between saving and investment
activities of banks.
The question is whether legal separation can prevent contamination between
saving and investment activities, leading to more stability. Investment
banking activities are interwoven in various ways with the rest of the financial
system. Specifically, in the Netherlands, there is a "retail funding gap",
meaning that the savings and loan demand in the Dutch retail market is not in
equilibrium. One of our biggest concern is that a separation of investmentbanking from deposit-banking activities worsens the dependency of Dutch
banks on wholesale financing. This would lead to an increase in risks and
higher costs for services to both corporate and private customers, and
adversely affect our economy. And the problem is that such strengthening of
the reliance on wholesale funding is increasing the risk of contamination. This
is even worsened by the loss of diversification that makes banks sensitive to
macroeconomic shocks, which is not beneficial to the stability of banks.
Another concern is that legal separation of “investment-type” banking
activities, including trading activities to serve customers like derivatives for
individual corporate customers, probably reduces the number of banks that
can provide these kind of activities. These activities are in the Netherlands
limited in comparison with foreign banks. Separation makes them non-viable.
The disappearing of investment- and trading-activities by Dutch banks implies
that Dutch businesses will have to apply to large foreign investment banks for
investment banking, i.e. a foreign bank who hasn’t built up a relationship with
these businesses. Separation will hamper risk management of companies en
investment opportunities of non-financial businesses abroad. Also,
dependence on foreign players outside the EU is undesirable since it means
greater uncertainty on the financing of the European economy.
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All in all, we endorse the position -that last year was put forward by the Dutch
government- not to go further than ensuring “ring-fence-readiness” in a crisis.
This does not require any further regulation.
The High Level Expert Group also proposes further regulatory reforms, for
example on governance and capital requirements. We think it is prudent to
first finalize the current measures to strengthen en stabilize the bankingsector. Further accumulation has distortive effects upon bank functions which
are of vital importance to the recovery and growth of the economy.
One of the measures currently being finalized concerns the use of designated
bail-in instrument as a resolution tool. This instrument is supported by de
High Level Expert Group. We endorse the conclusion of the Group that
unclear definitions limit the liquidity in de market for debt. Since the
dependency of Dutch banks on financial markets is high, it is very important
that clarity on the exact application of the bail-in instrument is needed.
Best regards,
drs. C. Oudshoorn
director VNO-NCW