Germany aims to relieve small banks of bureaucratic burdens. A recently leaked policy paper, reported by the “Handelsblatt” Friday edition, outlines the proposals currently on the table for discussion among policymakers, banks, and financial regulators.
The core of a prospective European regime for small banks would be the elimination of the existing equity‑capital ratio, which is tied to both a bank’s capital and the risk profile of its activities. Instead, small institutions would be required to meet only a leverage ratio, where equity is measured against total business volume.
Many banks, however, fear that the initial proposals from BaFin and the Bundesbank are unattractive for a large number of institutions, and that only a handful of German banks will ultimately take advantage of the small‑bank exemptions. To counter this, the German banking community sent amendment and supplementary suggestions to BaFin and the Bundesbank on March 10. The seven‑page position paper from the Deutschen Kreditwirtschaft (DK), an umbrella association of banking chambers, was classified as confidential by the “Handelsblatt”.
The DK’s draft asks that risk‑free assets-especially central‑bank reserves-be excluded from the leverage‑ratio calculation. The same exemption should apply to low‑risk loans such as municipal credits.
BaFin’s executive director Nikolas Speer said at a “Handelsblatt” event that he had received the DK paper and would work with the Bundesbank, the finance ministry and the banking institutes to forge a unified German stance. “If we do not take this step, whatever the small‑bank regime ends up looking like, it will have no chance in Europe” he warned.