In September or October, the European Commission will announce new rules that will introduce a new minimum capital making it more difficult for banks to decide the size of their capital base using their own internal calculations. The rules – part of the Basel III international banking reforms – will come into effect between 2023 and 2028.
However, Paris, Berlin, Copenhagen and Luxembourg are trying to persuade the Commission to change the minimum level imposed.
They argued that the way international standards have been developed threatens to penalize EU banks.
Jörg Kukies, Germany’s Deputy Finance Minister, said the Franco-German proposal is “a pragmatic way to ensure a truthful and compliant implementation of Basel on the one hand and to respect the political mandate of [the EU’s economic and financial affairs council] and G20 also for no significant increase in capital requirements “.
According to an impact assessment by consultancy Copenhagen Economics, the Basel Accord would leave eurozone banks needing to raise $ 170 billion to $ 230 billion in capital.
Alternatively, banks could reduce their loans from $ 600 billion to $ 700 billion to rebuild their reserves above the minimum levels.
The report – released Wednesday – says the rules will increase lending costs for EU companies by 0.25 percentage points and wipe out 0.4 percent from gross domestic product.
A French official said Paris wanted to “strictly enforce the Basel agreement”.
They said: “It’s about finding a way to do it in Europe that avoids gold plating and over-transposition.
The Dutch government added: “In the interest of the coherence, simplicity and robustness of the framework, a single stack approach should be used, including EU specific capital requirements.”
The European Banking Authority said the single-stack approach would increase capital requirements by 18.5%, leaving the eurozone banking sector with a capital shortfall of approximately $ 52.2 billion.
An EU official admitted that there was “push back on the issue of the output floor, due to the number of banks concerned that capital requirements might rise excessively”.
They added: “We think these increases will be well below some of the previous forecasts.”
The Commission told the Financial Times: “We will implement Basel, including the output floor.
“We also need to ensure that implementation does not result in significant capital increases for the EU banking sector in general.
“The banking sector’s ability to finance the economic recovery must be maintained.
“We think we can achieve it by remaining faithful to the key elements of the reform.”
The new rules will be finalized by the European Parliament and the EU Council of Ministers.
This post originally appeared on Daily Express :: World feed