In honour of Franco-German Economic Day, a look back at the meetings held by Nicolas Théry, President of the French Banking Federation (Fédération bancaire française – FBF), and Christian Sewing, President of the German Banking Federation (Bankenverban – BdB), with various French authorities. They addressed the common challenges of the French and German banking sectors, including the transposition of the Basel Accords and sustainable finance.
The French and German banking sectors reiterated the importance of transposing the Basel Accords, which take into account the specific characteristics of their markets and allows them to work alongside their customers to finance their development. The presidents of the two federations returned to the soundness and resilience of their banking models, tested in particular by the health crisis, and their ability to support citizens and businesses in extraordinary times.
Financing the ecological and digital transition is a major challenge and must take place under conditions that preserve Europe’s strategic autonomy. It involves very extensive investments – €330bn per year for the ecological transition and €125bn per year for digital technology according to the ECB – which European banks must be able to finance. This is why it is important not to create competitive imbalances with other economic areas by increasing their capital requirements, which would negatively impact the strategic autonomy of our continent and limit its ability to move forward.
The European Commission’s proposal published on 27 October 2021 contains regulatory relief measures that take into account European specificities. These relief measures are, unfortunately, temporary, which in the longer term will hamper the financing of residential real estate, unrated companies (mainly SMEs) and investment banking.
As detailed in the FBF’s press release of 27 October 2021, “As part of the negotiation process, which will last several months, the banking profession will continue its discussions with the European authorities in order to propose technical solutions for transposition that are in line with these objectives and work to evolve the initial text of the European Commission, which contains several interesting avenues, but which are temporary or only benefit certain banking communities. ”
On the subject of sustainable finance, this meeting highlighted the sector’s pioneering role in the fight against climate change and its desire to be an important solution to the transformation of the economy. While the EU has also decided to use the financial sector to achieve this, banks are already becoming the main solution.
All major French and German banks have signed up to the Net Zero Banking Alliance and support the Principles for a Responsible Bank to make their commitments concrete. Furthermore, with regard to the issue of green bonds, four French banks are in the world’s Top 15, and 78% of German private banks are actively aligning their portfolios with the objectives of the Paris Agreement. Lastly, with regard to the exposure of French banks in the energy sector, in 2020, while coal financing only represents €2.1 billion of their corporate portfolio, renewables reached more than €44 billion, an increase of 68% in four years.
These results are encouraging, and we must maintain the means to accelerate. To successfully finance an inclusive transition, the European taxonomy must rightfully include what is contributing to the transition and not limit itself to what is “already green”. It must also inspire all geographical areas, so that the ambitious attitude of the European Union, which is the right one, does not become a burden in competition with continents that prefer a less rigorous approach.
The FBF, together with its European counterparts, remains committed to ensuring that the European banking sector can continue to effectively finance our continent’s economy.