Committee on Economic and Monetary Affairs Ordinary meeting
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ECON European Parliament
Follow its sittingsMichalis Hadjipantela
Thank you, Chair. First, I would like to thank the rapporteur for all his efforts to prepare a report where he takes into consideration all of our concerns and all of his and all of our concerns.
We are here to support him and we appreciate this effort. Dear colleagues, as you have already been informed, discussions on the global role of the euro are ongoing. We have held three meetings so far, with a fourth scheduled for tomorrow, but then rescheduled for next week. As expected, the main point of disagreement, as this was mentioned by the rapporteur, concerns European Union safe assets and common bonds. We fully recognize that this is a sensitive issue for certain Member States and colleagues, and we will continue to respect these concerns.
In our view, strengthening the international role of the euro requires a competitive and innovation-friendly economy, deep and liquid euro-denominated capital markets, and the mobilization of both private and institutional investment. In this context, we propose focusing on measures that enhance financial stability while fully respecting Member States' fiscal responsibilities. At the same time, we should avoid permanent debt mutualization and thereby minimize potential moral hazard risk. Furthermore, in line with the coordinators' decision, we respect the work carried out in other files, including the digital euro report adopted today. We therefore do not intend to introduce additional comments on those matters in this report.
Thank you very much.
Nikos Papandreou
Thank you very much. I just joined, so did you speak already? Yes. Okay. I know, I wanted to make sure so I can say I agree with much of what he said because we know the report and it's, in my opinion, it was a good relationship between the rapporteurs and we agree in general.
And the main thing that we like as S&D is the need for a safe asset as a benchmark, first of all for the markets. It's not just a safe asset, and we made very clear that it's a conditional safe asset. It's not to mutualize debt from the past for each country, but it's for specific projects. If we're talking about AI or biotech sector or safe, we can only fund that with a safe asset. We know that.
So that's our opinion is that we need that and for social programs, public goods. Safe assets can be special for public goods, such as we did with the RRF or with COVID. So we have the example in the past. And I know there's a certain resistance to that, but it needs to be mentioned in the Capital Market Union that we need some sort of reference point for Capital Market Union for depth of the market. And we know the United States has a special privilege of the dollar, but because the market is unified, they have their safe asset called the American bond.
So we see how well it works over there and we don't have that here. I think that's the main difference and some difference between the groups. We have mentioned, thank you Mr. Hadjipantela, for the digital euro. It's not overly done just because I'm a rapporteur on that, but it's just a positive relationship. And I think, since I haven't, didn't bring my written notes, I think I'm covered for now.
Thank you.
Pierre Pimpie
Alors moi je dois dire que je suis tout à fait en accord avec ce qu'a dit mon collègue chypriote. Donc en fait, certes si on voit la force du franc suisse pour prendre ce cas, donc on voit bien que c'est un pays qui est bien géré, donc c'est aussi ça qui fait la force du franc. Donc je pense qu'il faut aussi que l'on rappelle que si on veut avoir un euro donc qui joue donc un rôle fort, il faut aussi que ce soit un euro qui rassure et donc qui soit le reflet de pays qui sont bien gérés.
Et ce n'est pas vraiment le cas chez nous. Donc si on voit les finances françaises franchement ça ne rassure pas et ça et ça ne rassurera pas ceux qui vont donc investir chez nous. Et si on prend le cas du dollar et bien là on voit que la force du dollar c'est le reflet de l'armée qui est très très forte chez eux c'est donc qu'ils peuvent se projeter donc ils peuvent fixer leurs propres règles c'est aussi ça qui fait leur force. Et en fait donc je crois qu'il faut plutôt qu'on vise ces prérequis de gestion saine bon plutôt que d'aller vers le concept assez risqué de de de bien d'emprunt commun. Donc là donc j'arrête là donc en fait ça rejoint le propos de mes précédents collègues.
Je vous remercie.
Merci beaucoup. Ludovit Odor for Renew.
Ľudovít Ódor
Thank you. I also wanted to thank to the rapporteur for the interesting discussions and his his willingness to make compromises and finding the position of the Parliament. I would like to stress at the beginning that actually the best thing we can do for the international role of euro is to have a strong and competitive economy because that's that's the most attractive feature we need. On several points which have been already mentioned on the safe assets question we recognize that this is a bit hot topic in in the Parliament. So but as my S&D colleague mentioned we would like to focus on safe assets not in relation to mutualizing existing debt at the national level but with a strict conditionality to finance genuine European public goods and that is that is an important difference and I'm pretty sure that we can we can find a language which which will be accepted by most of most of the groups.
Another very important aspect for me is or that actually the international role of a currency in the 21st century is not only about direct payments but by the infrastructure. If you have the right infrastructure then you can play an extremely important role on the global scene and from that perspective the digital euro and also I do not mean just the retail digital euro but also the projects on the wholesale digital euro are promising avenue how to strengthen further the international role of euro.
Another important aspect related also to the digital Euro is the international vulnerabilities of our financial system because also the financial stability concerns are very important and from that point of view we need to identify all those strategic vulnerabilities where we are depending on a small subset of international players and to fill the holes in that regard. And the last thing I wanted to mention is that from our perspective also the ECB did an excellent job in creating the Euro-Rep, the repo facilities which are mechanisms how to offer repo lines, Euro denominated repo lines for many countries and actually there is a strong demand from all over the world to that facility. So once again, thanks for the work and I'm really confident that we can have a very strong end result and something positive which can be voted in this committee or in the Parliament, thank you.
Jussi Saramo
Thank you, Madam Chair. Also I'd like to thank the rapporteur for a very good job, the work he has been doing and also the other shadows. Now it's the momentum because the United States... this is one debate, should we talk about Euro without talking about dollar or other currencies? Of course we cannot because it's also a competition and there is a US dominance and people are searching for alternatives because of political reasons but also because of market-driven reasons and of course these two are together. But at the same time we have this great momentum, we also have a lot of threats to the Euro and to Europe, to the world and the financial market stability because of the stablecoins and other new ways to create private money that are threatening the central banks' possibilities to act.
To have a stronger Euro, it would be important not just for Europe but also globally and this is one approach that I would like to keep in mind, that it's very important for Europe to have a stronger currency but also for the whole world it would be very important to have alternatives for US dollar and also for the private money. But I think there is no one thing we need, there are a lot of... like we need a coherent roadmap, a lot of actions we need to do but since the safe assets was already mentioned, this is one point I think that it's very important, one of the key issues. If we don't have any safe assets then it's clear that it's not going to be as strong as US dollar, at least as the way it is at the moment. So it's not enough if we have a strong economics on the other hand if we don't have ways to use the Euro. So I think we are in a good direction.
Today the digital Euro decision and it was very important and I hope we manage to have a very strong message to send to the Commission and the Council and the Central Bank. Thank you.
Thank you. And I give the floor back to the rapporteur. Unless any shadow is first? Sorry, no. Okay, so Rasmus.
Rasmus Andresen
Not a lot to add. Thanks to all the shadow rapporteurs. And indeed I can echo what most of you said. I think we are on a good way, but we also have to balance, especially the language, our text, take some concerns also more into the report which hadn't been addressed in the same manner in our draft. And then I also think that especially with the remarks from S and D and Renew, I think this could be also a good way forward in like the biggest issue we still have to deal with in the report on the safe assets.
There will be a technical tomorrow. We will have one more shadows next week and then hopefully we are a bit closer to the vote.
Aurore Lalucq
Thank you so much. And the vote in ECON is scheduled for July 15th. Thank you to all of you. So. My understanding is that there is a debate on safe assets in EPP.
Our next item is a scrutiny slot on the delegated act amending the new market risk framework, the so-called FRTB. I am pleased to welcome the invited experts, Mr. Almoro Rubin de Cervin from the Commission, Mr. Lars Overby, I don't know if that's the right pronunciation, from the European Banking Authority, and Florian Weidenholzer from the Single Supervisory Mechanism. Let me briefly provide some background to today's discussion. On June the 4th, the Commission adopted a delegated act introducing temporary amendments to the renewed market risk framework, the so-called fundamental review of the trading book. This act, which amends directly the level one text of the Capital Requirements Regulation, is based on Article 461a of CRR.
According to this article, the Commission shall monitor differences in the implementation of the market risk framework in third countries, and where it detects significant differences in such implementation, the Commission is empowered to adopt delegated acts. Already in 2024 and in 2025, the Commission adopted two delegated acts to postpone the entry into force of the FRTB until January 1st, 2027. The act scrutinized today is therefore already the third one on the FRTB. It introduces certain temporary and target amendments to the CRR, which are to be applied from January the 1st, 2027, for three years. And we are keen to hear more from the invited experts on the background of this delegated act.
In line with agreed practices, the following procedure will apply. The experts will have an opening statement of five minutes, and then of course there will be a Q and A session with the members of the ECON Committee.
And I will give first the floor to Almoro Rubin de Cervin for the Commission.
Almoro Rubin de Cervin
Thank you, Chair, for the floor and thanks for organizing this scrutiny slot. We had a first discussion here in the committee in September 2024 when we proposed the first delegated act. We then presented a second one, as you mentioned, last year and they were both supported by Council and Parliament. Given the international uncertainty and the persistent impact on the level playing field, the Commission has adopted on 4th of June, as you were saying, a third delegated act in accordance with the mandate laid down in Article 461a of CRR. The empowerment aims to preserve an international level playing field for banks' market risk activities in which they face intense competition from third-country banks, both globally and in the EU market.
The Commission was mandated to monitor the differences and where significant differences in such implementation are observed, empowered to adopt delegated acts. So the mandate empowers the Commission to postpone up to two years and to apply for up to three years targeted operational relief measures or targeted multipliers in the calculation of the institutions' own fund requirements for market risk. Before entering to the specific elements, one word on the international situation. The US has finished last week the consultation on its proposed, re-proposed implementation of the Basel rules. It will take still some time to finalize.
Actually, there is no actual date of implementation available yet. The UK will implement the FRTB from January 2027, but the rules on internal models have been postponed and delayed and has just started a new consultation of three months with further changes. Both implementations have a number of deviations from the standards and actually further tweaks and we've seen from inputs from industry that additional changes are requested to the US rules. So there is indeed a significant level playing field aspect. So the delegated act does in essence three things.
One, actually it enables all EU banks to progress on FRTB implementation and eliminates for almost all banks the need to have two parallel systems. So actually we are implementing the FRTB framework in the EU. Second, it introduces a limited number of temporary targeted amendments, both to the internal model approach and to the standardized approach. And the amendments are largely based on what we have been observing on the international stage. And third, it allows banks adversely impacted to temporarily neutralize capital increases via a specific targeted multiplier that is applied to their market risk own fund requirements.
It is a multiplier targeted to banks most impacted in terms of level playing field, which is precisely the objective underpinning the empowerment. In our view, we have been fully faithful to the mandate that co-legislators agreed upon three years ago. The delegated act is a temporary solution that safeguards the level playing field. A long-term approach to the market risk framework will be assessed in the context of the forthcoming package next year and will be mentioned in the report that the Commission will adopt in mid-July. And hopefully by then we will have full visibility on the international application of the standards in other jurisdictions.
The delegated act respects fully the limits of the mandate as all measures remain temporary and are justified by level playing field considerations. Those measures, including the multiplier, intervene on risk classes and risk factors covered by the mandate where the Commission can act and not beyond that. For instance, in relation to aspects linked to the boundary between the banking and the trading book, which is an operational burden frequently mentioned by banks, it is for regulators and supervisors to provide clarity to market participants on practical implementation issues, and so it's not covered in the delegated act itself. I guess my colleague Lars from EBA will cover this in his intervention. And I would like here to thank EBA and SSM colleagues for their cooperation in preparing the delegated act all along.
And I hope to conclude, I hope that the committee fully supports the delegated act. Thank you.
Thank you. And so I will give the floor to your colleague that you just mentioned, Lars. The floor is yours.
Lars Overby
Thank you very much, Chairman, and thank you for inviting me today. So I think the key message is perhaps to start with a clear overall support for going ahead with the delegated act in its current form. I think it provides the regulatory certainty that is needed for banks for the next three years, and it also allows to start a political process subsequently where we can target global convergence and the level playing field that I think we all see is needed and possibly also take into account any European specificities. Now, having been part of the process since the inception of FRTB in Basel, and I think also having discussed intensely this topic with the banks and supervisors recently, I think it's clear that a compromise had to be found between those who wanted to move ahead with the FRTB and those who had reasons to ask for a neutralization of the capital impact. And I think the Commission delegated act achieves that.
It's a compromise which takes into account the different views around the table, both within and outside the EBA. But I think what's more important is providing clarity now rather than going in fine-tuning individual elements and therefore we support the going ahead. I think as Almoro alluded to, then there is the issue in addition to the delegated act on the issue between the boundary and the trading between the trading book and the non-trading book, which is a topic that I think EBA will look at. In the past, we've published a no-action letter recommending not to enforce the boundary rules that were agreed in the CRR3 package. I will say while no final agreement has been made by the EBA Board of Supervisors at this stage, it is clear that being in a situation where you operate with two boundaries across banks is perhaps less meaningful and therefore effectively postponing the implementation of the boundary will also kind of allow the political table here to consider all issues in a subsequent more political process.
The EBA also in collaboration with the competent authorities, we are also then discussing right now on whether more technical guidance is needed, for instance in the area of reporting. So we are all looking into these issues and stand ready to help out smoothing any implementation issues. On the implementation issues, as I said, we stand ready to do what we can and support, but I also want to be very clear that we are very committed to moving ahead with FRTB implementation in Europe.
The FRTB framework is an overall improvement. We get more risk sensitivity. We are addressing all the shortcomings that we've seen on the previous market risk framework when setting capital requirements. So the delegated act, while neutralizing the impact for the negatively affected banks, is only really needed because of the lack of implementation in other jurisdictions and the need to kind of preserve a global level playing field for EU banks competing at the global scene. So the moving ahead of the FRTB is something that's also important for us.
And the delegated act opens up a path for banks to go ahead with this and implement the FRTB and is therefore overall a positive thing. Looking ahead, we also probably have to prepare the next steps. At ECB, I think we are very closely following the development, especially in the US and the UK, as Almoro also mentioned, in addition to exchanges with banks. We have been given an explicit mandate under Article 461a of the CRR to look at the global equivalence on this. And we will probably also use this to identify any measures to address shortcomings of the framework, especially on the rules regarding to internal models, which I think right now is only envisaged to be used by less than a handful of banks in Europe.
So I think we hope to finalize this work on Article 461a by the end of the year and will take probably a more forward-looking perspective in our work on how to amend the framework. But before we embark on any regulatory changes again, I think we need to buy the time to provide clarity on the current framework so that banks and supervisors can prepare and start their work on the delegation on the implementation of the delegated act. Thank you.
Thank you for the SSM, Johannes Videnholzer.
Florian Weidenholzer
Thanks a lot, Chair, and thanks a lot for inviting ECB Banking Supervision to this discussion. This is a very important topic for us as market risk is a relevant source of risk for banks that, if not managed properly, can cause significant losses and ultimately affect individual banks and sectors. And we've seen that in many occasions in the recent past. And also recent market dynamics are showing, for example, in April 2025 with the trade tariff announcements and volatility spikes related to that, that the topic is continuing to be relevant, in particular in turbulent geopolitical waters. So market risk continues to warrant supervisory attention for us.
In this context, the proposal put forward by the European Commission in the Commission Delegated Act to have the FRTB enter into force beginning of '27 is very much welcome. It is not advisable from our point of view to postpone further the application of the rules. Why that? Regulation should be very close to appropriate risk management standards and not introduce a parallel regime. And the implementation of the FRTB actually will have significant benefits in this regard in terms of added risk sensitivity for market risk, in terms of enhanced risk management practices, but also in terms of proportionality as it's allowing banks to choose between internal model approach, standardized approach, and simplified approaches.
We also share the view that is also underpinned in the underlying legal framework that maintaining a global level playing field is important. Trading activities are among the areas where European banks compete most directly with banks in other jurisdictions and it's the risk category which is easiest transferable across borders. Overall, we observe that an international landscape is developing where in some case proposed, in some case finalized rules include deviations from Basel standards. The Commission proposes targeted amendments, I think address those areas where deviations structurally occur. Going forward, it will be important to monitor implementation differences further across major jurisdictions, but also we are committed to discussing those again in the Basel Committee to find common solutions as well.
We have in the process provided advice as Almoró mentioned to the Commission on how to shape the targeted amendments in a risk-based manner while preserving the level playing field and guarding against a strong dilution of the FRTB framework. And in our role as supervisors, we've been working for some years actually starting from the implementation date of the corresponding reporting requirements in 21 to prepare banks to implement the final standards. The gradual shift has I think allowed us to make the industry better prepared for the transition. Some technical issues and we mentioned the compromise nature of this remain in the implementation of the new approach and we will address them also in our ongoing supervision. For example, we need to work with banks which opt in for the target multiplier mechanism that was mentioned in the best and smoothest way possible, keeping their current market risk models running in parallel, but also implementing the new FRTB systems and we expect this overlap to only apply to a small number of banks which could be overly affected by new capital requirements.
In general, we continue regardless to expect sound risk management from banks, for example regarding their data aggregation capabilities, their approaches towards very complex products and non-modellable risk factors. We will continue also to closely interact or engage with banks on market risk in general and ensure that the new framework is applied consistently, thoroughly, making sure that the main areas of risks are covered within that period. Many thanks.
Aurore Lalucq
Thank you, thank you. Q&A session, I'll give the floor to Markus Ferber for EPP.
Markus Ferber
Yes, thank you very much and before I begin with my question, let me briefly say on behalf of the EPP group and on behalf of our shadow rapporteur that we welcome the fact that the Commission is actively addressing the issue of an uneven application of the Basel III market risk rules. The Commission had already delayed the FRTB application twice before resorting to this delegated act and in doing so exhausted every postponement tool available to it under the Capital Requirements Regulation.
The United States re-proposed its own Basel III implementation in March of this year without specifying a start date which has been set and its proposals show material structural departures from the Basel framework. This will grant US banks capital benefits that the Basel framework does not recognize. Had the delegated act not been adopted, EU banks with significant trading books would have faced stricter market risk capital requirements than their US and UK competitors from next January. So can the Commission provide a concrete estimate of the additional capital burden EU banks would have absorbed relative to their US and UK peers absent this intervention, or to put it simply, how high are the costs of inaction here? Thank you very much.
Almoro Rubin de Cervin
Sure, sorry, I wasn't sure if you had a series of questions and then the reply. Very difficult to give you a very specific data, also we don't have the data, maybe the colleagues from EBA and SSM. It depends on many factors, so it depends on the starting point of the banks, how many banks have models today and how many banks having models today would move to a standardized approach first. This is the first group of banks impacted. It depends second on whether they would keep or not the double, the old models alive or not.
It depends on the market activity that the banks do, they might do less and so the capital impact would then be lower. So there are so many factors that it's difficult to provide a precise quantifiable effect on, or at least from our side, a very quantifiable effect. Anecdotal evidence is in a number of cases is very significant in terms, but I let the colleagues who actually master the numbers more precisely today. One of the difficulty here is also the limited number of banks impacted and so actually difficult for us to provide a lot of data publicly because this would have been sort of very easily identifiable for each of the banks who in any case are reporting under EBA reporting conditions about the impact in the long term. So I think there are data available, but it's a substantial impact, in particular for the large banks, and this would have had significant impact on the ability of European banks to actually do market activity significantly and would have pushed a few banks out or in any case with less presence in the markets.
I don't think that's in the interest of the European financial system. I don't know if any of you wants to complement on with more precise figures.
Lars Overby
So I think we have the data on what is the impact at the individual bank level, but I think what we, yeah, I understand, but I think the problem is we don't know which banks are going to move ahead with FRTB under the delegated act and which ones are going to neutralize the capital impact. So I think we can provide the numbers from I think from our reporting and I'm happy to provide this afterwards on what is the overall impact assuming that everybody moves ahead. I think that number we can provide, I only need to dig in a little bit of our reports, but it does not take into account for instance the 10% reduction on FRTB SA and other things which are in the delegated act.
Florian Weidenholzer
Just on the banks that we are supervising, I think we have two different trends. The first trend is that if you look at it at an aggregate level, aggregate also in terms of institutions' capital requirements, the impact is rather low, so we would expect around 0.8% increase in risk-weighted assets for all of our banks. But again, that is not equally distributed, so for the five most impacted banks, it would increase by 3 to 4% roughly. But it is of course relevant if you look at market risk risk-weighted assets alone, where we can see that some institutions are facing relative changes that are very high. And for the ones that are most impacted, it's around 80% of increase in their requirements for market risk, which is not mirrored then of course in the final capital requirement figures as only 4 to 5% of the entire capital requirements are allocated to market risk.
So in a nutshell, it's different whether you look at it from an entire institution perspective or whether you dig into market risk specifically and into highly specialized institutions specifically, where we actually see a quite remarkable difference.
Thank you. For the S&D, Jonás Fernández.
Jonás Fernández
Sí, muchas gracias, chair. Hablaré en castellano. En primer lugar deseo agradecer a la Comisión, a la EBA y al SSM su presencia en esta conversación, en esta sesión de escrutinio de este nuevo acto delegado. Quizá antes de entrar en los detalles sí me gustaría hacer una reflexión general sobre el principio del level playing field. Sin duda es un principio que debemos internalizar en nuestra toma de decisiones, los mercados financieros especialmente son mercados internacionales y sin duda el marco regulatorio europeo debe permitir una competencia leal entre las compañías europeas y las que no lo son.
Ahora bien, el principio del level playing field no puede ser un principio absoluto que guíe todas y cada una de las decisiones que tomemos, porque por encima de este principio está el principio de estabilidad bancaria o el principio de estabilidad financiera. O dicho de otra manera, si terceras jurisdicciones se introducen en sendas de desregulación agresiva, esto no debiera ser un argumento, el principio de level playing field no debiera ser un argumento para replicar tales sendas de desregulación bancaria. Más bien al contrario, quizá si terceras jurisdicciones hacen estas cosas, en Europa debiéramos revisar nuestro propio marco prudencial para fortalecerlo, evitando, minimizando las vías de contagio de riesgos financieros de otras jurisdicciones sobre las entidades europeas. Por lo tanto, level playing field es un principio que tenemos que tener en cuenta, pero no puede ser un principio absoluto. Sobre este acto delegado he de decir que evalúo este acto delegado teniendo en cuenta, como digo, no solamente este principio sino el de estabilidad financiera y he de decir que las opiniones favorables del SSM y de la EBA aportan algo más de certidumbre a la decisión que la Comisión ha tomado.
En cualquier caso yo creo que el informe de competitividad bancaria que la Comisión hará público el próximo mes nos permitirá saber cuál es la agenda de largo plazo y por lo tanto evaluar correctamente si esta medida puntual es puntual o abre el camino hacia otras medidas que podrían situar a nuestro sistema bancario en una situación peor. Termino, perdona, con la pregunta. El artículo 495v... I'm sorry, Jonás, but I mean, could you conclude please? Sí.
El artículo 495v creo que podría extralimitar el mandato que los colegisladores dieron a la Comisión.
Me gustaría conocer la opinión de la propia Comisión. Y como digo, saber si el futuro informe sigue la senda de desviarnos de Basilea. Gracias.
Almoro Rubin de Cervin
No, thanks, Jonas. Is this an absolute principle or not? It isn't. And the objective of international standards is double. So it's financial stability and level playing field.
The two components are essential. And if we don't act, then as you say, risks seem to move out. Move out either to other markets or to banks which are under lower rules. So in that sense, we have to find a balance where how much we match what the others are doing and where we draw a line. And it's not an easy balance overall and not an easy balance on the specifics.
But we have this very much in mind. One of the aspects, that's why we are going ahead with the FRTB. And that's why actually we're doing this with significant supervision as my SSM colleagues were doing, ensuring that risks are addressed even if the capital requirements are neutralized. Now on the article itself, actually I was able to follow your Spanish but not maybe the exact number of the article. Maybe it's the 495 V, which is the one with the multiplier.
We think this is perfectly in line with the mandate because it addresses the specific factors and asset classes. It covers all of them. But that's actually per the mandate. The mandate allows to address the asset classes and risk factors. It doesn't say that we have to address only some of them.
It covers all of them. So in that sense, we think it's perfectly in line with the spirit and the letter of the mandate. Thank you.
Gilles Boyer
Thanks, Chair, and thanks to everyone. I think I have more remarks than questions, but every opportunity is good. Thank you to the Commission for having made this very necessary proposal. This is an element of the banking package negotiations which was very important to us. And time has shown that we were absolutely right to foresee the needs for different tools in order to adapt our legislation if other major jurisdictions did not implement the Basel agreement.
So it is now unfortunate that the different tools have all needed to be used. But thankfully we had the foresight to include them in the legislation. So I would like to thank the Commission for having made full use of those tools after detailed and broad consultation with the stakeholders.
Thank you also for the serious and balanced analysis of the risks linked to not modifying the current FRTB articles in the European legislation. I think at each stage of the process concerning FRTB, the Commission has weighed up the risks and taken a moderate decision concerning delayed implementation. And today the proposal that has been made is the tool that is still at the Commission's disposal, and I think that it is the right one. From the very beginning of the banking package negotiations in 2022 and 2023, I have said that we need to ensure the right balance, both financial stability and an international level playing field, and the same priorities will also be my focus in 2026 and beyond, because we must ensure that European banks can compete on a level playing field with third-country banks while ensuring financial stability in a volatile economy. I believe that this delegated act is an important step in ensuring that this remains the case.
Thank you. Two minutes, Chair.
Anyway. Juste avant vous, il y a quelqu'un qui a explosé tous les temps, alors mon cher Gilles, deux minutes c'est parfait. Merci. Any comment?
OK. Any catch-the-eyes, any request for the floor, of course, Markus.
Markus Ferber
Yeah, thank you very much. The European Banking Authority is required to submit a report on the international FRTB implementation by the 10th of July, and on the 15th of July the Commission will come up with its communication on the competitiveness of the banking sector. And I'm wondering how this interaction of both can be safeguarded if EBA comes to conclusion that there's not yet a level playing field, and how will the Commission react on that as we have this timely narrow approach between both things. Thank you very much.
Almoro Rubin de Cervin
I think actually that EBA will be late because to some extent this also reflects the international developments. No, they're not waiting actually because their report is based on the international developments. So it's actually what we are going to say on this in the communication, in the report, to some extent is irrelevant compared to what they will be saying. They will be just watching what is, what are the developments internationally. But I'll let Lars say.
We will just set out what is the overall direction. But the real difficulty that we face here is a situation where the initial standard as designed has revealed itself to be too difficult to implement, in particular because it's actually too burdensome and because some of the data premises were actually didn't materialize. And so there is an adjustment taking place in a lot of jurisdiction, and there is an open question to what extent the Basel Committee itself will engage and when, knowing that actually for us the timing of any work of the Basel Committee will be difficult to respect because if it will start in any case if it happens after the US finalize, and the US will finalize in the second part of this year. So the Basel Committee won't start any work before next year. We have to make a proposal in the meantime.
So we'll have to go ahead with our own implementation in any case. So, but you want to say more on where you are with the report.
Lars Overby
Well, I can confirm we're late. I think the problem with the mandate is we're supposed to assess the other jurisdictions, and there's at least one notable jurisdiction where we don't have the final numbers or anything that we can compare with.
So I think we, as I said in my intervention, I think we are aiming for a report by the end of the year where I think we would also be looking at in particularly what needs to be done on the IMA and come with recommendations on this and make an overall assessment on what are the changes that's needed. I will just recall that the delegated act is only for three years and then we need the full political process afterwards. So I'm perhaps a little bit more focused on the next step that we find a framework which we can implement globally also and have the alignment with the US colleagues, although it is difficult to have a good talk with the US colleagues at the moment.
Aurore Lalucq
Thank you to all of you for this discussion and the three months scrutiny period of the delegated act will end on September 30th, 2024. Thank you. Okay, we now turn to the consideration of the draft report on the amending directive regarding the strengthening of the framework for occupational retirement provision, the so-called IORP, IORP II, by rapporteur Damien Carême. The Commission adopted and published its proposal on amending the EU rules governing the activities and supervision of IORPs on November 20, 2023. Today's rapporteur will present his draft report on this proposal and then there will be of course the comments from the shadow rapporteur and I will now give the floor to the rapporteur for six minutes.
The floor is yours.
Damian Boeselager
Thank you, Chair. Colleagues, in the conversations that we had before I tabled this report, I already understood that many of you see the situation similar to me. We have a situation in Europe where there's pressure on our pension systems because of the massive demographic shift that we see, because of the weak performance of the European economy, and also because of the inability in some member states to reform and look at the sustainability of their pension systems. And these are pressures that we already see and that might worsen with more baby boomers reaching the retirement age. So I think it's clear that the context in which we are discussing pensions here in the European Parliament is a very sensitive context and that's why I proposed in my report to focus on two core priorities.
The first one is to actually improve the uptake of pension schemes, of occupational pension schemes. As we know that pillar one is more and more strained, it is important that we have more and more people actually taking or making use of occupational pension schemes, or as we call it, pillar two pension schemes. And to improve, and this is my second priority, to improve the performance of these occupational pension schemes by also investing in more innovation in Europe. So on the first priority of the uptake, there's a couple of things that I will pick out, but of course you can see in the report there are more ideas there. The first one is that we actually exclude more small pension schemes from the regulatory burden of the IORPs directive.
So we are increasing the level of small IORPs that are actually excluded to make it more attractive to set up a small IORP.
Second, we propose that there is a portable low-cost default pension scheme also for the self-employed, the gig economy, also those that move from country to country within the European Union in order to create more security and fight old-age poverty for the self-employed. And we increase the transparency requirements for pensioners or for the members of these pension schemes to understand what kind of pension they can actually expect and to have a holistic view not only on pillar two but also on pillar one and pillar two and pillar three together. The second part is about improving the performance of the occupational pension schemes. And here I just want to make a little excursion also into the fact that we need to look at this proposal in the context of the savings and investment union. I mean, Europe's occupational pension funds hold 2.72 trillion in assets and basically serve 74 million members across more than 1,400 institutions in Europe.
And that is a huge pool of patient capital that has a long-term perspective in the European Union. But only 0.12% of that capital actually reaches European ventures for growth. So that means that we have a rather massive underinvestment in venture capital in a situation when we all understand that our economy has to become more competitive and focus more on innovators to reinvent itself because many of our industries are changing massively how they're working. So our perspective here is that we can actually increase the performance of occupational pension schemes by applying the basics of investment theory of diversification of portfolios by putting forward the idea that 2% of the assets of the larger pension schemes should be invested into this innovation, into the Draghi billions that we are still waiting to be delivered from other areas. So that is our idea how to increase the performance of these pension schemes by basically having a minimum allocation of 2% in venture capitals for the larger pension schemes.
But there are also other things that we are doing. We try to qualify productive investments in a new definition under Article 19 where we basically look a bit at also more bundled ways of investing into venture capital and trying to show that there can be an automatic or let's say like a possibility to apply the prudent person principle in a way that allows for more productive investments. And this is something which I'm very much looking forward to have a detailed conversation with you. So let me summarize. I think we have a huge potential here to make occupational pension schemes much more attractive for a much broader category of people to fight old-age poverty and to ensure that there is a decent life after retirement for people even if pillar one has demographic challenges at the moment.
And we can ensure that the performance of these pension schemes is actually better by solving the issue that there's an underinvestment in innovative asset classes in Europe which could also help our economy grow which would then in return again increase the pensions on pillar one and pillar two with the increased growth that we could see from that.
So I very much look forward to our negotiations which will basically kickstart now with our exchange and I very much look forward to a strong report together with a large majority. Thank you.
Thank you, the rapporteur. For EPP, Dirk Gotink.
Dirk Gotink
Thank you very much, Chair. Thank you, rapporteur, for the very clear introduction to your draft report and your proposals until now. From our point of view, the analysis is totally almost identical in the sense that the demographics are not in favor of our governments nor of our national budgets and we will have a very, very hard time in avoiding pretty serious situations of elderly poverty and parts of the society and increasingly also parts of younger society that are simply not building up pensions at all. Now then we come to Europe, which is not necessarily a silver bullet for all these problems. But let's just start with the proposal.
In our view, the IORP directive should not force member states to invest in supplementary pension schemes. It should be inviting member states to start them. And the question is, does the proposal actually do that? In our view, it is failing on several points. It is making actually the starting more complicated with a lot of new tasks for EIOPA and delegated acts for the Commission.
I think and I also acknowledged that the rapporteur has already sort of moved that away in some of the issues and I think that's a good direction to work in. So we should be inviting them and not prescribing them. That includes, I'm afraid, also on the investment front, dear rapporteur, because the Draghi billions are, I think we have to be clear whose money this is. This is people that have put aside a part of their salary every month and are not expecting golden mountains in the future. They're expecting a solid, normal, sort of stable pension at the end.
And somehow prescribing investment strategies from the legislation, I would think is not the best way to go. But I, like you, look forward to those conversations we will have about that. So let's also use this opportunity then to make it future-proof because I think the basic point that we're trying to solve here is that there's a lack of trust in the system. And that is not a lack of trust in investors or whatever. It's about individual people that are actually members of these IORPs.
And that's why I think we should really work on the idea that the IORPs should act in the best interest of the members and beneficiaries. Here we can work on the transparency issues about investment policy, returns, direct and indirect costs, and realistic benefit projections, but all from a more of a national perspective and less of a prescriptive European one, as I said. I think also we should talk about the issue of the right to property because in case law and national practice this is already the case, but we need to build trust foundations in the system for it to be open to people. So overall, aim for an approach that respects national practices, contributes to trust and transparency, and also to capital markets. And then the last point, what we actually were waiting for was a kind of a starter pack for IORPs for member states.
We have brainstormed a lot about it and proposed a growth path that you can basically start and not immediately fall entirely under the full IORP, but you grow into a heavier sort of regime. If we don't invite and make it easier and create systems of trust that people also want to trust in the future, then I'm afraid this will be an extremely difficult project for many, many governments.
And I think we should do our best to try to help them to solve this problem. Thank you very much, Chair.
Thank you. Jonas Fernandez on behalf of Mr. Debrani.
Jonás Fernández
Thank you. Thank you, Chair. As you say, the S&D shadow, Adnan Debrani, cannot attend to this meeting today and he asked me for reading a note. So in that case, if I spend more than three minutes, this time will not be my fault. So thank you to the rapporteur for the thorough draft and for all the work you have done.
Occupational pension systems differ significantly between member states. This is an important and sensitive issue for many of us. For me, my starting point is clear. Supplementary pension, including occupational pension, must never undermine strong public pensions. The responsibility of the state to guarantee secure and adequate first pillar pensions must remain fundamental and intact.
The revised rules also improve outcomes for European pensioners. Occupational pensions should become more accessible, transparent, and secure while supporting better long-term returns for members and beneficiaries. At the same time, while the main objective must always be to strengthen pensions for individuals, this file is also an opportunity to support more long-term investment in the European economy. However, I see significant risks in introducing requirements on how pension funds should invest. Today, the guiding principle is the prudent person principle.
Investments must be made carefully, responsibly, and in the best long-term interest of beneficiaries, rather than according to fixed quantitative investment limits. We should not make pensioners carry the risk for political objectives. Venture capital and other high-risk investments can play a role in a diversified portfolio, but it must be for pension institutions themselves to decide based on their responsibility to act in the best long-term interest of members and beneficiaries. A third key point is the scope of the directive. IORP II is a minimum harmonization directive.
It should not go beyond its mandate or risk undermining well-functioning national occupational pension systems that have operated successfully for decades. This is particularly important for pension schemes rooted in a collective agreement and for systems governed by structures representing social partners and their interests. These models must be respected and protected. I am therefore cautious about the extent of the level two and level three mandates given to the Commission and EIOPA. In a minimum harmonization directive, substantial policy change should not be made in a way that bypasses the ordinary legislative process.
I look forward to working constructively with all of you to ensure the best possible outcome for European pensioners. Thank you.
Aurore Lalucq
See, when you read the text of someone else, you respect the allocation of time. Kidding. Thank you, Jonas. For PPE, Olger Zijlstra.
Auke Zijlstra
Thank you, Madam Chair. I will continue in Dutch. Voorzitter, ik heb met interesse het voorstel gelezen van de rapporteur over de harmonisering van de tweede pijler pensioenen. En ik herhaal hier het eerdere verhaal dat de analyse is helder en we zijn het daar ook over eens.
De eerste pijler staat meer onder druk doordat de lidstaten vergrijzen, de belastingbasis stagneert en laten we eerlijk zijn, er is ook geen fiscale ruimte meer. Iedere euro die werknemers vanaf nu inleggen in een pensioenregeling helpt al en wij moeten dat inleggen stimuleren. Maar om dat te bereiken moet een aantal dingen gebeuren en wellicht kan ik dan ook even aanhaken bij dat gebrek aan vertrouwen dat de schaduwrapporteur voor de PPE net zei. Ten eerste moeten pensioenrechten in de tweede pijler expliciet worden erkend als eigendom van de individuele pensioenspaarder. Het opgebouwde pensioenvermogen is niet van fondsbeheerders, niet van sociale partners.
Het ontbreken van een helder eigenaarschap is een rem op de acceptatie. En daarbij hoort ook een jaarlijks pensioenoverzicht dat vergelijkbaar is, niet identiek, maar vergelijkbaar is met dat van andere aanbieders en waaraan ook rechten ontleend kunnen worden. Ten tweede moeten pensioenspaarders sterker betrokken worden bij de beleggingskeuze van hun fonds. Niet via algemene risicoprofilering en steekproeven, maar door alle deelnemers gewoon rechtstreeks te bevragen over hun voorkeuren en risicobereidheid. Mogen wij uw geld beleggen in lijn met Europese beleidsvoorkeuren?
Volgt u liever de algemene tendens op de wereldmarkt? Dat soort vragen. Maar daar dient dan ook gevolg aan gegeven te worden. En het spijt me voor de rapporteur, maar de tweede pijler is geen financieringsbron van de gewenste extra investeringen in risicokapitaal van in de EU onder de noemer van de spaar- en investeringsunie. De sterk tegenvallende rendementen van de grote Nederlandse pensioenfondsen in de laatste vijftien jaar zijn een waarschuwing tegen dergelijke politieke aanwijzingen.
De teleurstelling bij pensioengerechtigden is al groot. Dat alles gezegd hebbende, acht ik dit onderwerp van enorm belang voor niet alleen individuen van jonge en hogere leeftijd, maar, en dat zeg ik niet vaak, voor alle lidstaten. Ik kijk uit naar de samenwerking op dit dossier en dank u wel.
Marlena Maląg
Viorica-Marina Malag. Dziękuję bardzo. Chciałabym podziękować sprawozdawcy za jego propozycję. Z naszego punktu widzenia pozytywnym elementem sprawozdania są z pewnością odniesienia do reguły pomocniczości. Szkoda jednak, że zawężono je do nie dla niektórych państw, takich jak Holandia, Niemcy, Belgia, których praktyki sprawozdawca uważa za cenne z punktu widzenia celów dyrektywy.
Niestety obawy państw takich jak Polska, że rewizja dyrektywy nie bierze pod uwagę specyfiki tych systemów, nie zostały naszym zdaniem wystarczająco uwzględnione. Co do całości sprawozdania, to stawia ono sobie naszym zdaniem zbyt rozległe cele. Kwestie klimatyczne czy też założenie kwestii emerytalnej luki płacowej z pewnością wykraczają poza zakres rewizji, która zmierza przede wszystkim do przekierowania dużej puli oszczędności na rynki kapitałowe. Za najbardziej niebezpieczną uważam jednak otwartość sprawozdawcy na bardziej ryzykowne inwestycje IORP, co może zagrozić bezpieczeństwu przyszłych emerytów. Co zaś do samej rewizji i jej kierunków, to uważam, że wynika ona nie z rzeczywistej potrzeby czy niedoskonałości obecnych przepisów, ale z wiary, że harmonizując i normalizując systemy emerytalne w całej Europie, będzie można znaleźć środki na inwestycje.
Niestety Komisja znów wchodzi w prawa, daje sobie taką możliwość kształtowania dowolnie rzeczywistości europejskich systemów emerytalnych.
Tymczasem krajowe systemy emerytalne tworzyły się przez pokolenia, mają swoją specyfikę, uwarunkowania i próba harmonizacji na siłę nie jest niczym dobrym. W Polsce na przykład rewizja IORP może wymusić zmianę prawa i całego systemu pracowniczych programów emerytalnych. Oczywiście złożymy poprawki zmierzające do usunięcia tych mankamentów. Po pierwsze, nie należy lekceważyć i narażać na rewolucyjne zmiany utrwalonych krajowych systemów emerytalnych. Nie można proponować reformy polegającej na narzucaniu niektórym państwom modelu funkcjonującego w innych państwach.
Po drugie, poszukiwanie kapitału inwestycyjnego kosztem zwiększonego ryzyka dla przedsiębiorców nie jest fair. Wszystkie reformy powinny za punkt wyjścia przyjmować właśnie interes przyszłych emerytów. A po trzecie, unijne inicjatywy takie jak PEPP nie przyniosły jak dotąd znaczących sukcesów. Zamiast na narzucaniu harmonizacji powinniśmy się skupić na lepszej koordynacji ugruntowanych od pokoleń systemów krajowych. Dziękuję bardzo.
Anouk Van Brug
Thank you, Chair, and thanks, Rapporteur, for presenting this draft report. Renew sees this report as a solid base for further negotiations. In particular, the proposed reduction of administrative burdens on pension funds is a step in the right direction. That said, considerable work remains before we can reach an agreement. We will table amendments to ensure that the proposal reflects the diversity of existing pension systems across Europe and does not undermine well-functioning national arrangements.
We do not support harmonization for its own sake. Any European action must respect the principle of subsidiarity and focus on areas where it delivers clear and added value. Renew's priority will be to ensure proportionate and targeted rules that enable pension funds to do what they do best, which is provide secure and adequate pensions for our citizens. If we keep these principles in mind, I am confident that we can find a balanced landing zone. Thank you very much.
Thank you. I will now give the floor to Maria del Carmen Barrera Chamorro, the Rapporteur from the European Economic and Social Committee, for two minutes. Welcome to the ECON Committee.
Maria del Carmen Barrera Chamorro
Thank you, President. I will speak Spanish. El dictamen del CESE está de acuerdo en la necesaria mejora de los sistemas de pensiones complementarias, pero llamamos a incluir en la directiva que las pensiones complementarias no deben utilizarse para debilitar las pensiones públicas. Y para ello es necesario un enfoque holístico que combine medidas para mejorar los mercados laborales y reforzar conjuntamente los sistemas públicos y complementarios de pensiones. Llamamos también a una gobernanza participativa a través de la negociación colectiva y el diálogo social, instrumentos ambos que deben de ser reforzados para que puedan ser utilizados en todos los Estados miembros.
Hay muchos elementos positivos que reconocemos dentro del draft report que se presenta hoy, pero queremos además incluir una serie de recomendaciones y de añadidos a este dictamen. La creación de un comité de seguimiento con funciones específicas y representación de los Estados miembros, agentes sociales y otras partes interesadas para asegurar este enfoque holístico que creemos absolutamente necesario con la finalidad de que no se debiliten los sistemas públicos de pensiones y se garantice la igualdad y la cohesión social en Europa.
Que los fondos de pensiones de empleo además proporcionen información técnica acompañada de resúmenes ejecutivos claros y visuales en un lenguaje accesible y que los proveedores ofrezcan recursos básicos de educación financiera, aspecto este que consideramos muy relevante dentro de lo que podría ser quizá una pension literacy porque es esencial para las decisiones que toman las personas trabajadoras a lo largo de su vida en cuanto a la a las pensiones. Además en situaciones de infrafinanciación recomendamos que las autoridades de supervisión tenga puedan distinguir entre factores temporales y estructurales a fin de que se puedan evaluar correctamente los planes de corrección. Y por último recomendamos que la inclusión dentro del draft report que los Estados miembros puedan evaluar deban evaluar las prácticas de desacumulación y el impacto en los consumidores y en última instancia favorecer estas que sean de mayor interés para las personas trabajadoras. Concluyo agradeciendo que se nos invite hoy aquí. Esperamos seguir contribuyendo junto con vosotros a una Europa mejor en beneficio de todas y todos.
Muchísimas gracias. Gracias presidenta.
Thank you so much. Any requests for the floor? No, so I will give the floor back to the rapporteur.
Damian Boeselager
Yeah, colleagues, I was expecting that you would just accept the report as it is, so I'm a bit sad now, I have to say, but I do see a lot of common ground when it comes to transparency, when it comes to the question of regulatory burden and subsidiarity, and I do think that we can, you know, start the work on this basis and I'm very much looking forward to your amendments. Allow me just to comment on the one question of the 2% investment into venture capital because I think it has been driving some controversies in some member states and I do think it's an important point. First, for me it's very important to understand it's a misconception that portfolio diversification is bad for the pensioners or the members. The problem that we currently have is that we are falling from the horse from the other side. We have an underinvestment in certain asset categories which could also have positive externalities for our competitiveness, but it's also harming the pensioners and the members of the current pension schemes because our pension schemes sadly very often go in a certain direction of, yeah, if you want, conglomerate investments which which makes it a bit difficult to to get the returns that are necessary.
So I'm just to be very clear here, I'm not asking for 100% of assets to be invested into venture capital. I'm asking for 2% and I think it's very important to understand that 98% would still be invested into different things. So the reason why I want to also spark this debate is because in many conversations with smaller pension schemes I've heard the same thing, like let's not play games with our pensions, but I just want to say the opposite is true. If you don't diversify your portfolio, you're playing games with the pensions. So it's just very important for me to understand that if we invest 300 billion euros of our IORPs in the US, you know, that can make sense out of certain considerations of diversification, but let's also understand that we need to deliver on the Draghi billions in order to have a strong European economy and that there are positive externalities if we just do the minimum of diversifying the portfolio of the pension schemes.
So I'm looking forward to the discussion on on this core issue. I think we can all help clean up a bit the misconceptions that exist in when it comes to portfolio diversification and I very much look forward for delivering for European innovation and the pensioners at the same time.
Thank you so much. And the deadline for amendment is June 25 at noon and the vote in ECON is scheduled for October 15. Thank you so much to all of you. And the next ECON committee meetings will take place on July the 2nd, 15 and 16 in Brussels.
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