Germany is working to relieve small banks from excessive regulatory burdens. A confidential memo, reported by the “Handelsblatt” (Friday issue), outlines proposals currently debated by policymakers, banks, and financial regulators.
The core of a proposed European regime for small banks would be to eliminate the existing capital‑adequacy ratio, which ties a bank’s required equity to the risk profile of its balance sheet. Instead, small institutions would be required to maintain only a leverage ratio, measuring equity against the total size of their book.
Many banks have expressed concern that the current Bafin and Bundesbank proposals make the regime unattractive for many German lenders, raising a fear that only a handful would ultimately benefit from the small‑bank exemptions. To address this, German banks sent amendment and supplement proposals to Bafin and the Bundesbank on March 10. The seven‑page position paper from the Deutsche Kreditwirtschaft (DK), a coalition of banking associations, is classified as confidential by “Handelsblatt”.
The DK’s main request is that risk‑free assets-particularly central‑bank balances-be excluded from the calculation of the leverage ratio, and that low‑risk lending, such as municipal loans, receive similar treatment.
Bafin executive director Nikolas Speer said at a “Handelsblatt” briefing that he has received the DK paper and intends to work with the Bundesbank, the Federal Ministry of Finance, and industry institutes to forge a unified German position. He warned that without such coordination, “this small‑bank regime, in whatever form it ends up, will not stand a chance in Europe”.
