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EU finance ministers set to oppose US-led reform

International Business
Thu, 07 Jul 2016

Brussels: European Union finance ministers will issue a statement at their meeting next week urging bank regulators to avoid imposing a disproportionate increase of costs on European banks, draft conclusions of the meeting said.

The Basel Committee, a body of banking supervisors from nearly 30 countries, is reviewing global banking rules. The results are expected by the end of the year.

Ministers at their regular monthly meeting in Brussels on Tuesday will say “the reform package would not be expected to result in a significant increase in the overall capital requirements for the European banking sector,” according to draft conclusions. 

An EU official said that EU states agreed to take a common line in opposing wide-ranging reform, anticipating it will be too favourable to US banks.

The core of the review is the introduction of models to calculate bank risks based on common standards, rather than on benchmarks developed internally by banks. The objective is to facilitate the work of supervisors when they assess bank balance sheets. Banks from several European states oppose the plan, saying it would raise their costs.

The French and German banking federations said the new rules “may mean that the capital requirements for banks will rise in some cases by up to a further 50 per cent,” a joint document released yesterday said.

France is on the front line to oppose the reform, which critics are calling Basel IV, as if it were a new set of regulations. 

The Basel Committee says it is simply completing the already-agreed Basel III reform of global banking rules.

An initial draft of the EU finance ministers’ conclusions included a hard limit on how large an increase in the capital requirements Europe would be ready to accept. The text said that the reform should not increase requirements “by more than 5pc” compared with existing capital obligations.

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