‘Planned reform of global banking rules need changes’
BRUSSELS: A planned reform of global banking rules being discussed by the United States, Europe, Japan and other major economies risks negatively affecting European banks and needs to be changed, the EU financial services commissioner said on Thursday.
The Basel Committee, a body of banking supervisors from nearly 30 countries, set the year-end as deadline to conclude an overhaul of banking rules — known as Basel III — meant to make the sector safer. But opponents, mostly in Europe and Japan, feel the review goes too far. They fear it disproportionately increases how much capital banks must hold against risk. “As things stand, the proposals Basel has issued for consultation would imply significant capital requirement increases in all areas,” EU commissioner Valdis Dombrovskis told a banking conference in Brussels, in the most explicit criticism so far of the review by a European official.
He made it clear Europe could not accept a reform that would lead to a significant increase of capital requirements for Euro- pean banks, and called for a more balanced proposal.
European bankers were encouraged by Dombrovskis’ “change of tone” compared with past EU statements on the issue, a banking official said. It remained to be seen what capital requirements increase would be acceptable to the EU in a possible deal with the United States.
Officials at banking trade body AFME estimated the new rules would likely increase capital at least by 6 percent on average.
The rise in capital requirements would hit mostly European banks, the industry fears, because under the proposed rules their large loan portfolios would make them look more risky than U.S. banks which provide more bond financing and package mortgages on for trading elsewhere. A second banking source said Europe may consider a Basel deal only as “guidance” and apply it flexibly. “We need to continue having international convergence as regards rule books,” said Martin Merlin, the Commission’s official in charge of financial regulation.