Regulators are relaxing capital rules for major European banks

Frankfurt Some major European banks will have to meet lower capital requirements in the future. The reason for this are new rules for the classification of globally systemically important institutions, which the Basel Committee on Banking Supervision has agreed on. They stipulate that cross-border transactions within the EU are now predominantly treated as domestic transactions.

The rules affect institutions such as BNP Paribas and Deutsche Bank, whose difficulties would endanger global financial stability. This is why these banks have to hold more equity capital than other banks.

The amount of the extra capital buffer depends heavily on how much cross-border business the institutions do – and it is now likely to decrease or disappear for some banks. In future, 66 percent of cross-border transactions within the EU will be treated like domestic transactions.

“With this decision, the Basel Committee recognizes the progress we have made in recent years in integrating the European financial markets,” said Bundesbank board member Joachim Wuermeling, who is a member of the committee, to the Handelsblatt.