The European Union may consider pushing back when lenders need to start phasing in tougher Basel bank-capital rules by as much as a year after warnings that pressing ahead with the original timetable may drive up costs, according to three people familiar with the talks.
EU lawmakers and officials, facing a Jan. 1 international deadline for incorporating the rules, held the latest in a series of meetings yesterday on how the bloc should implement the Basel measures, said the people, who asked not to be identified because the negotiations are private.
Representatives of Cyprus, which holds the rotating EU presidency, and legislators from the European Parliament, discussed whether the start date for phasing in the measures within the bloc could be delayed beyond the beginning of next year, said the people. Possible alternative dates might include July 1, 2013, or Jan. 1, 2014, one of the people said.
“A delay would give more oxygen to banks to solve their capital problems,” said Marco Elser, a partner at investment bank Advicorp Plc in Rome. “The oxygen is the time, which will give banks more options.”
The implementation date was on the agenda for yesterday’s meeting, which also included draft liquidity rules for lenders and capital requirements for when banks finance international trade, four people said.
Othmar Karas, the lawmaker leading work on the draft rules in the European Parliament, denied that any discussion took place at the meeting on a change of dates for when the rules might enter into force.
“A change of the dates of entry-into-force of the new capital requirements for European banks has never been discussed,” Karas said in an e-mail. “The time schedule of the implementation will be discussed in the last round of negotiations and not a moment before.”
Karas has requested written comments on the issue of when the legislation should enter into force, a person said.
“The question of timing hasn’t been discussed and Mr. Karas has not asked for written comments,” Daniel Koster, a spokesman for the parliament’s EPP group, of which Karas is a member, said by phone.
Delaying the official deadlines for complying with the Basel measures “will still not prevent some institutions from seeking to meet the new requirements ahead of their competition in order to enhance their market position,” Richard Reid, research director for the International Centre for Financial Regulation in London, said in an e-mail.
European banks have said the original start date is “wholly unreasonable” given that the final details of the EU’s implementation of the measures is still unknown. Trying to prepare for rules that are still in flux could drive up their costs, the lenders said.
Cyprus, which holds the EU’s rotating presidency, cites the implementation date as one of 17 outstanding issues to be resolved during negotiations with the parliament on the law, according to a document obtained by Bloomberg News.
Other matters to be settled include the scope for curbs on bankers’ bonuses and how far national bank regulators can exceed capital requirements set by the EU, according to the document, which was prepared to update governments on the state of play in the talks ahead of this week’s meeting.
The Group of 20 nations agreed in 2010 that the Basel rules should be phased in from next January and should be fully applied by 2019.
The EU has struggled to agree on how to apply the Basel rulebook for banks as legislators and officials spar over curbs on bonuses and how to ensure lenders can weather funding squeezes. The measures would more than triple the core capital that banks must hold as a buffer against insolvency.
No decision on any delay was made at yesterday’s meeting and further discussions on the draft law will take place later this month, the people said. Further negotiation meetings are scheduled for Oct. 23 and Oct. 24 in an attempt to make headway. The possible delay to the start of the phase-in process was on the agenda of yesterday’s meeting in Brussels.
Michel Barnier, the European Union’s financial services commissioner, said this week that it may be possible to reach a political deal on the draft law later this month.
Stefaan De Rynck, a spokesman Barnier, declined to immediately comment.
This week the Basel Committee on Banking Supervision, the global standard-setting body that prepared the rules, admitted not all nations will meet the 2013 start date.
“Policy makers are increasingly looking to address the weaknesses in a broken credit transmission system as the economic outlook deteriorates,” Huw Van Steenis, head of European banking analysis at Morgan Stanley, said in an e-mail.
“We also see regulators trying to avoid the mistakes of last year of accelerating deleveraging through overly swift implementation of new more onerous rules, although the markets will nonetheless keep the pressure up given the rules have been announced,” Van Steenis said.
The Bloomberg Europe Banks and Financial Services Index yesterday surged as much as 2.2 percent, the most since Oct. 1. The index advanced 0.7 percent at 8:55 a.m. London time.
“What we’re seeing here is an open recognition by the EU that there is a combination of forces at work making it unrealistic to expect full compliance with the Basel rules on the original timescale,” Reid said. “Some jurisdictions have already made it clear that this is no longer feasible or perhaps even desirable.”
The possible European delay in the start of the phase-in process comes as global regulators seek to bolster their defenses against too-big-to-fail banks.
The Financial Stability Board, which brings together G-20 finance ministry officials, central bankers and regulators, yesterday announced additional capital rules for lenders whose failure could roil national economies, and updated a list of banks whose collapse could bring down the global financial system.
The Basel committee this week published a progress report on nations’ implementation of the Basel III rules, identifying Argentina and Turkey as those countries that are furthest behind with their rule-making.
China, Japan and Singapore have already published final rules, the report said, while the European Union and U.S. are still working on draft regulations.
--With assistance from Sonia Sirletti in Milan, Elena Logutenkova in Zurich and Nicholas Comfort in Frankfurt. Editors: Christopher Scinta, Anthony Aarons, Peter Chapman
To contact the reporter on this story: Jim Brunsden in Brussels at [email protected]
To contact the editor responsible for this story: Anthony Aarons at [email protected]
© Copyright 2022 Bloomberg News. All rights reserved.