According to insiders, European banks could soon look forward to a weakening of the rules known as Basel III.
(Photo: dpa)
Frankfurt According to informed circles, the member states of the European Union should soon agree on a weakened version of the new capital requirements for banks. The legislators are thus accommodating the banking industry, which had warned of the negative consequences of a strict law on new lending.
The latest draft for the implementation of Basel III contains several changes compared to the earlier version of the EU Commission. It could be adopted by finance ministers in Brussels as early as Tuesday, according to people familiar with the matter.
Accordingly, the banks would be spared an increase in the risk weight for certain equity investments, and there would also be a lower capital burden for the risk weight for subordinated debt instruments. In addition, the institutes are gaining flexibility when granting real estate loans.
After the 2008 financial crisis, global regulators spent a decade crafting new rules requiring banks to back certain businesses with more equity. This should make the system more stable and avoid bailouts at the expense of taxpayers.
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However, Europe, where companies rely more on banks for financing than on capital markets, has been reluctant from the start to implement the rules known in technical jargon as “Basel III” and in many cases has fallen below these minimum standards. The latest plan, while emphasizing the “utmost importance” of implementing pending regulatory measures, stresses the need to avoid a “significant increase in overall capital requirements” for the European banking system and to take into account the “peculiarities of the EU economy”.
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The European Central Bank and the European Banking Authority said just last week that they were “very concerned” that the EU’s implementation of Basel III was being pressured to deviate from the standards originally agreed in 2017. The European Commission’s proposal last year already included deviations from the original standards, they said.
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