As we explained in detail in our April 2018 response, what is most needed now is far more systematic proportionality in the application of Basel-derived rules to small, non-complex banks. As is well known, the Basel Agreements apply formally only to “Basel banks” – large, internationally-active banks. Some jurisdictions only apply Basel rules to a handful of their large banks. But the EU, ostensibly for single market / single rule book reasons, has applied practically the whole of each successive Basel regime to all credit institutions with no, or very little, differentiation even for the smallest and least-complex banks. We recognise and respect the efforts the Commission has so far made to re-introduce proportionality, following on from the 2015 Call for Evidence under the REFIT initiative, and with some limited but important and welcome measures already adopted in the “CRR 2” dossier – such as the legislative recognition of the small, non-complex bank now in Article 4.1 item (145). But without further, explicit action by the Commission now, the default paradigm for Basel 4 implementation will remain application to all EU banks regardless of size or complexity. We regard this approach as fundamentally at variance with the right to proportionality founded in Article 5 of the Treaty on European Union.

Read our full response here.