Paris and Berlin take the lead in efforts to downplay Brussels’ stricter bank capital regulations
As Brussels prepares to enact the long-awaited legislation, several EU countries are fighting the final battle to weaken the EU’s most significant banking regulatory change in a decade.
The proposed rules will introduce a new minimum capital or floor, making it more difficult for banks to use their own internal calculations to determine the size of their capital base.
The European Commission is expected to propose rules-this is part of the international rules Basel III Banking Reform ——September or October. But according to those involved in the discussion, the capitals headed by Paris, Berlin, Copenhagen and Luxembourg are trying to persuade the committee to ease the minimum level imposed. They believe that the way in which international standards are set may punish EU banks.
German Deputy Finance Minister Jörg Kukies told the Financial Times that the French-German proposal is “on the one hand, a pragmatic way to ensure the authenticity and compliance of the Basel Agreement and respect its political mandate. [the EU’s economic and financial affairs council] And G20 capital requirements have not increased significantly.”
The new rules will take effect between 2023 and 2028, but they have been delayed by one year due to the pandemic. Some diplomats said that the need to promote the recovery of the European economy from Covid-19 strengthened the committee’s reason for balancing.
Central bankers and regulators reached an agreement to tighten rules in 2017, including controversial The “bottom line of output” prevents banks from using risk estimates that are far below the output of standardized models designed by regulators.This concept has caused a lot of use in France, Germany, and Nordic countries. Internal model.
According to calculations by the European Banking Authority, these standards may force banks to increase the amount of capital they hold by more than 10%. The four states are arguing about a so-called “parallel stacking” approach, which will help prevent capital requirements from increasing substantially.
A French official said that Paris hopes to “strictly implement the Basel Agreement” on the bottom line of output, no more, no less. “It’s about finding a way to avoid gilding and excessive conversion in Europe,” the official argued. “In short, any two-digit [per cent] The increase in capital requirements is of great significance to us because it violates the G20 commitment. “
Another “single stack” approach-including full application of rules-is more stringent and is supported by other countries such as the Netherlands and the EBA. EBA analysis The implication is that it will raise capital requirements by 18.5%, leaving the euro zone banking industry with an estimated capital gap of 52.2 billion euros.
In 2019, EBA warned that the parallel stack approach was not in compliance with the Basel Agreement.
Andrea Enria, Director of Supervision, European Central Bank Said last month The EU “will not succumb to the temptation to introduce creative methods”, such as the parallel stacking rule, which is “critical”.
The Dutch government stated in a position paper submitted to its parliament this week: “For the consistency, simplicity and robustness of the framework, a single-stack approach should be used, which includes EU-specific capital requirements.”
An EU official said, “There is resistance to the issue of lower output limits because many banks worry that capital requirements may surge excessively. We think these growth will be much lower than some earlier forecasts.. ”
The committee told the Financial Times: “We will implement the Basel Agreement, including the bottom line of output. We must also ensure that the implementation does not translate into a significant increase in the overall capital of the EU banking industry. The banking industry should be maintained to provide funding for economic recovery. Capability. We think we can achieve this goal while staying true to the key elements of reform.”
The German government is also concerned that these regulations will increase banks’ capital requirements for loans to companies that do not have external credit ratings. Instead, it proposes a hybrid approach based on the bank’s internal estimates of the company’s risk.
The committee is working on legislation to make the new system effective; it will then be finalized by the European Parliament and the Council of Ministers of the European Union.