Communication on better regulation (European Commission)

Call for Evidence: Communication on better regulation

Finance Finland welcomes the Commission’s initiative to make EU regulation better, simpler and more efficient. The EU regulation can often end up being too complex and fragmented. In our experience, the current state of the European regulatory framework for financial sector undermines competitiveness and increases administrative burden. In addition, the complex regulatory and reporting frameworks impose significant extra costs on financial sector companies, through e.g. IT system changes and implementation projects.

Finance Finland urges the European Commission to:

• Create measurable goals for limiting the regulatory burden, similar to the commitment to reduce the reporting burden by 25 %.
  
  
• Critically examine whether any new legislation is needed. New legislation should not be considered the primary solution, if the same objective can be achieved by clarifying existing legislation or enhancing national implementation.
  
  
• Set reasonable, adequate and clear entry-into-force deadlines, so that there’s sufficient time to implement level 2 and 3 regulations.
  
  
• Conduct stress tests as well as SME and competitiveness tests. These support evidence-based decision-making.
  
  
• Strictly define the European Supervisory Authorities’ mandates concerning level 2 and 3 regulations. The burden and level of complexity caused by level 2 and 3 regulations is currently too high.
  
  
• The European Supervisory Authorities’ and supervisors’ mandates should be amended to include promoting the competitiveness of the financial sector.
  
  
• Set clear limits to the European Central Bank’s regulatory powers in level 1 legislation. Review the gold-plating that ECB supervision has imposed on banks’ regulatory burden and its real-world economic impacts, e.g. by pushing banks to increasingly use the standardized approach.
  
  
• Carry out regulatory reviews only when the need for them is explicitly identified and proven, and only when enough time has passed since the implementation of the initial directive or regulation.
  
  
• Pay attention to the quality of impact assessments. The goal of improving competitiveness should be embedded in impact assessments, to make sure that the legislation supports economic growth.

Administrative burden is caused especially by the weight of level 2 and level 3 regulations in the financial sector. Finance Finland encourages permanently reducing the amount of level 2 and 3 regulations. A simpler regulatory structure would make it easier to act swiftly when needed. Hence, we welcome the Commission’s initiative to examine the necessity of the current level 2 and 3 regulations, and urge the Commission to repeal any non-necessary level 2 and 3 regulations. Merely postponing the entry into force of these regulations may only cause more uncertainty.

Reporting obligations are perceived as burdensome and complicated by companies in the financial services sector. The necessity of reporting must be evaluated critically, and unnecessary and duplicative reporting obligations should be removed. Any new reporting obligations or small sporadic changes should be avoided, as they do not reduce burden but rather create uncertainty.