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Proportionality in banking regulation - another powerful speech from Bundesbank's Dr Dombret

Readers of this blog will recall that we drew attention last September to an excellent speech by the thought- leader on this subject, Dr Andreas Dombret, an Executive Director at Germany's central bank, which was very much in line with the BSA's own thinking.

Now we can welcome another powerful intervention by Dr Dombret, in a speech given to the State of Hesse's Regional Banking Conference in Brussels on 21 February. Under the title "Prospects for, and obstacles to, greater proportionality in regulation - a supervisor's perspective", Dr Dombret sets out an irrefutable case for greater  and more systematic proportionality for smaller, simpler institutions - without compromising resilience or financial stability. 

There are two key insights in the speech which the BSA particularly welcomes. First - reduce operational burdens, retain minimum capital and liquidity requirements : the BSA has always argued that smaller simpler institutions should meet the same resilience standards such as on capital and liquidity. The problem is the complexity of regulation designed for large international banks, and the disproportionate compliance burden on smaller institutions. Second, take a systematic approach - a tailor a new framework for small banks and low-risk institutions, rather than just tinkering with individual rules.

The arguments in the speech represent a challenge to various European and other authorities who have talked much about proportionality but so far delivered little. What's hard to understand, as Dr Dombret has set out the case so clearly, is why others are proving resistant to the "small banking box"idea ? Have they all been captured by big bank interests ? I think we should be told......

Read the full text of the speech here

Posted by Jeremy Palmer on 05 March 2018