Legislators in the European Union have approved a slew of banking reforms including the closing of loopholes exposed by the financial crisis, according to a report by Reuters.
The overhaul was put forth by the European Commission in November of 2016, and it mandates the amount of cash a bank has to put aside to be able to absorb losses. It also introduces updated requirements, in line with post ‘07-’09 financial crisis levels, for liquidity and capital.
Parliament also passed protection for whistleblowers who bring crimes like tax evasion to light. Legislators also passed new rules increasing the powers of EU financial supervisors.
Also, banks will have to hold a minimum amount of funds against lending risks, to increase financial stability. They’ll have to meet funding requirements that are more aimed toward limiting an institution’s reliance on short-term financing. The reforms, while proactive, have been criticized for not being enough to stop the numerous scandals plaguing banks in the region.
Earlier this year, The European Commission looked ways to get banks to use its TARGET Instant Payment Settlement (TIPS) system, which was designed to enable people and companies transfer euros to each other in seconds.
The TIPS system, which was launched in 2018, is a challenge to payment companies and technology players such as PayPal. With slow adoption among banks to the TIPS system, the European Commission examined ways to speed up adoption, according to a report in Reuters. The system lets people in Europe transfer euros between each other even if the local bank is closed. As it stands, payment services offered by PayPal, Google, Facebook, Amazon, Alibaba and Tencent dominate the market in Europe.
“We are reflecting on whether a stronger regulatory push would be needed to speed up this process,” said Valdis Dombrovskis, the EU Commission’s vice president in charge of financial services. He said the system has the potential to disrupt the existing payment services. “In a few years, we want Europe to set new global standards for instant payments technology,” Dombrovskis said.