Europe not buying new bank rule

Debate in Basel pits bank regulators from Tokyo against a US-backed push for stiffer standards

Europeans told the world’s top banking regulator that they’ve had enough. In two heated meetings in the past week, regulators from countries including Germany and Italy told the Basel Committee on Banking Supervision that proposed changes to how banks assess credit, market and operational risks must be scaled back and slowed down, according to two people with knowledge of the matter.

Some European officials went so far as to say they wouldn’t adopt the proposals on the table, according to the people, who asked not to be identified because the deliberations were private. If the European Union — home to nearly half of the world’s most systemically important banks — balks at implementing the Basel Committee’s rules, it could undermine the global regulator’s authority and contribute to fragmentation of the industry.

The Basel Committee is racing to finish work on the postcrisis capital framework known as Basel III by the end of the year, and it’s under instructions not to increase capital requirements significantly in the process. The debate in Basel pits bank regulators from Tokyo to Frankfurt against a US-backed push for stiffer standards, which take effect when they’re implemented by national governments.

‘Negative consequences’

The industry says the proposed revisions to risk-assessment rules and limits on banks’ use of their own models to make these calculations would send capital requirements spiralling.

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