Dear Mr. Hofmann, in your perspective, how European cooperative banks are dealing with the current COVID-19 crisis?
In this situation, co-operative banks are fully mobilized to support the financing of the real economy and allow members and customers to get through this difficult period. At this moment in time it is key to provide reliable payment services and online-banking solutions. Co-operative banks are committed by nature to fully support the local economy and can act as stabiliser in times like these. Cooperative banks are fully integrated in efforts to issue new loans, extend payment deadlines and provide liquidity to their corporate customers and SMEs. Also in the current situation, co-operative banks are a driver of local and social stability with 2.800 locally operating banks and 52,000 outlets, they serve 209 million customers, mainly consumers, SMEs and communities.
Initiatives undertaken by Co-operative banks, members of the EACB, are gathered on a dedicated section of the EACB website: "Covid-19: Cooperation Banks' actions".
Which kind of initiatives and proposals the EACB has put in place with regards to the banking legislative framework?
Since the beginning of the crisis, the EACB has been closely monitoring the latest actions from the regulators and supervisors and has been proactively engaging with policy makers to voice Co-operative banks concerns. In all those extraordinary measures taken by the ECB or the European Commission, it is extremely important to take into account the specificities of the business model and structure of co-operative banks whatever their size, medium and small banks must benefit from the same supporting measures as the bigger ones.
We are collectively facing an extraordinary situation which requires agility, swift and bold reactions. Co-operative banks express their will to contribute hands in hands with the European institutions on the way back to a healthy and sustainable economy.
Did the regulators and, more in general, European institutions answer positively to the questions raised by the EACB?
The EACB welcomed the different measures taken by the EU regulators and supervisors that heard the co-operative banks’ call to take action to ensure the banking sector can sustain the economy through the Covid19 emergency, including the postponement of important deadlines of consultations, reporting packages, data collection exercises, recognizing the role played by moratorium tools in this moment in time, allowing the use of capital and liquidity buffers and so on. In particular, we welcome the key measures taken by the ECB to ensure that banks’ liquidity is available for supporting businesses, particularly SMEs.
The EACB also welcomed the aim of the European Commission to support credit flow to the economy with a package of temporary measures presented on the 28th of April. The package consists of a proposal for a regulation to amend the CRR and an interpretative communication. The measures proposed will help expand banks’ ability to lend to the real economy during these times of stress. In our view, they are a very important contribution to stabilizing the corporate sector, especially SMEs, in the current COVID-19 crisis (e.g. anticipating the rules on the SME supporting factor or the preferential treatment of loans secured by salary or pension, like the Italian “cession del quinto”). The amendments proposed for CRR certainly touch upon relevant elements that can expand the availability of resources for lending, however we believe that there is need for further elements to be considered particularly to avoid only having a patchwork solution that requires subsequent adjustments. The EACB believes that, in order to preserve trust and ensure that banks can fully support the business eco-system, coordination among public authorities and the banking sector is essential. It is also key to ensure that regulatory adjustments take a holistic perspective, ensuring that there is no misalignment between the incentives of nationally legislated financing support programmes and the efforts of ECB monetary policy on one side and the regulatory constraints on the other.
Do you believe this crisis could serve as a basis to start a whole reconsideration of the role of finance in Europe. How do you imagine the future for the European economy and growth?
Co-operative banks appreciate that the Commission recognises that banks in the EU are today much more resilient than at the onset of the financial crisis in 2008 and that this relative strength would see them best placed to play a key role to support the economy. However, given the unprecedented scale of the efforts expected in financing the EU economy to ensure a timely recovery, additional regulatory aspects should be considered to ensure that the risk build up associated with the credit process do not place banks under further supervisory and regulatory stress once the most acute phase of the crisis has subsided.
The impact of the corona crisis requires enormous efforts to maintain social cohesion and ensure that a path to the economic recovery can be swiftly taken. We can only expect that such efforts will be on an ongoing basis for the near future. Politics reacted with unprecedented speed and straightforwardness and created effective support, especially for SMEs. Flexibility will be key in ensuring that economic actors can continuously adapt to the evolution of the economic environment, this means for cooperative banks to be able to keep on playing their fundamental role in financing and supporting the economy. The model of cooperative banking, with strong local ties and a focus on the creation of value for members is more valuable in the current situation than ever.