Brussels outlines proposal to ease bank rules for green lending
(27 November 2019 – Europe) A proposal from the European Commission to ease EU banking rules in an attempt to spur green investment is likely to stoke a battle with the European Central Bank, where officials have warned against tampering with rules designed to make bank lending less risky.
Valdis Dombrovskis, a vice-president of the commission, told the Financial Times that he wanted to examine a cut to the capital charges imposed on banks’ climate-friendly lending. He said the initiative would encourage banks to finance energy-efficient homes, zero-emissions transport and other green investment by reducing the amount of capital they would have to set aside against such lending.
Ursula von der Leyen, the incoming commission president, is prioritising plans to curb EU carbon emissions as part of a so-called green new deal. The European Parliament is due to vote this week on new climate targets.
However, Mr Dombrovskis’ plan for capital charges faces opposition from banking supervisors. Andrea Enria, the head of the ECB’s bank supervision arm, insisted last week that financial institutions’ capital requirements should be based on the level of risk they take and should not be altered to pursue other objectives.
“Our mandate is to make banks safer and sounder,” Mr Enria said.
Mr Dombrovskis acknowledged the resistance to the proposal, noting that “green does not mean risk-free”.
The proposed plan from Brussels would be similar in scale to when the commission tried to drive bank lending to SMEs through similarly favourable capital treatment following the 2008 financial crisis. Under those EU rules, capital requirements for such business loans are nearly 25 percent below what they otherwise would be.