That business banking across the EU has become increasingly difficult is no great discovery. Whilst the EU is pushing towards a cashless society, it is inevitably delaying this by making it extremely difficult for businesses to operate.

The main factor behind this deterioration of business-friendly banking in the EU is the onus that authorities have put onto financial institutions. Banks, as well as other ‘Subject Persons’, have been burdened with all the weight of combatting financial crime.

This is where the first issue lies. The European business model is made up of small and medium sized businesses. Financial institutions are no different. This means that they are not only limited in capital capabilities but also lack the economies of scale to be able to justify an investment in systems that are able to effectively monitor transactions.

Imposing such onus on these institutions, which are inherently unable to effectively carry out such activity, creates several issues. Financial institutions have become risk averse due to the severity of sanctions they risk having imposed upon them. The risk is just too high, so when in doubt, they prefer losing a client’s business.

Although implemented to ensure AML/CFT measures do not unnecessarily limit access to financial services, the introduction of the risk-based approach has had the opposite effect. It has created uncertainty and subjectivity which are the worst enemies of businesses. Not knowing the extent of what is required, financial institutions are either going overboard with their implementation of AML/CFT measures or simply moving away from the business banking sector outright.

90% of EU businesses are considered small or medium enterprises. This means that banks’ portfolios are composed of many small, not very profitable, accounts. Many banks are shying away from offering payment accounts in general, simply because the risk/reward ratio does not justify it.

The results of these measures are several and significant. There is a reduction in availability of corporate banking and an even more limited access to trade finance. Considering that bank finance has always been the cornerstone of business and investment, the impact is not to be underestimated.

Ironically, the implementation of such measures by the authorities is having the opposite effect of that intended. Without access to accounts from major European/ local banks, businesses are resorting to smaller institutions, which in turn, are intrinsically less capable of monitoring complex transactions. Even worse, it is also encouraging businesses to look at less regulated options and jurisdictions. This will only increase systemic risk as this will reduce the regulators’ ability to oversee transactions and enforce regulatory measures.

It is clear that financial institutions have outright rejected the policing role that authorities have placed them in and are moving out of the market in storms.  This is causing significant disruption in access to banking services for businesses which in turn harms the economy. The effect of this has not made many headlines due to the 10+ years of growth which we have enjoyed. However, we live in a new reality today, with world economies tumbling and undoubtedly much harder times ahead. Authorities need to recognise and address this failure, as without an accessible banking system, businesses are only going to suffer further, and the eventual economic recovery will doubtlessly be impaired.


Chief Executive Officer

Karl Schranz

An accountant by profession, Karl spent 10 years working for a reputable audit firm in various audit roles before joining JP Morgan Chase in London in 2005, specifically working in Credit Hybrid Derivatives. He then returned to Malta to head the corporate finance arm of a local audit firm. In 2009, together with Christian, he was one of the founding members of a Corporate Services Provider in Malta, leaving to set up E&S Consultancy in 2010. Karl heads E&S’ ICO and Tokenomics department, however, his competences include advising and assisting in all MFSA licensing processes, accountancy, Token structuring, iGaming, and all aspects of corporate finance.

Karl is fluent in English, Italian, Maltese.

Phone:+356 2010 3020

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