FRANKFURT (Dow Jones) - Sabine Lautenschläger, the ECB's banking supervisor in the Council of the European Central Bank (ECB), has warned of too detailed rules for the banks. In a speech in Basel, Lautenschläger, according to the speech on the ECB website, said that such rules were expensive for the banks, could easily be circumvented and circumscribed the banking watchdog itself too tightly The criticism clearly refers to proposals by the EU Commission to reform the CRD4 rule.
"When we try to think about every possibility, the rules become too detailed, too big, too complex, and from then on, it makes the banking sector no longer safer, but creates new problems," Lautenschläger said. She warned firstly that an overly complex set of rules promotes regulatory arbitrage, secondly, that the number of rules increases the number of possible interactions disproportionately and that thirdly, a substantial set of rules will incur costs that exceed their utility.
"Instead of exaggerated detailed rules, we should better rely on strong base rules that leave the regulator some leeway," said the ECB Director. The EU Commission is currently working on a reform of the CRR / CRD4 capital requirements framework, which has already been discussed with the European Parliament.
Lautenschläger did not formulate her criticism of these proposals in detail. However, the ECB is likely to see that the handling of the capital requirements of the so-called Pillar 2 is to be modified in such a way as to undermine the supervisory review and evaluation process (SREP) which has just been set up.
This would limit the possibilities for the ECB to make on the banks, at their own discretion, capital or other requirements. The banks of the European area have repeatedly criticized the SREP process as being poorly transparent.
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