27 October 2021

Basel III package: EBF calls for further dialogue to secure Europe’s economic growth

The proposal puts forward several aspects identified by the EBF ... permanent solutions must be adopted to maintain banks’ current capital ratios without reducing their capacity to finance the economic recovery and to fund Europe’s digital transformation and sustainable transition.

The European Banking Federation (EBF) takes note of the relevant items outlined in the legislative proposal published today by the European Commission and highlights the importance of continued dialogue between banks and policymakers to complete the implementation of the internationally agreed prudential standards of Basel III. While the proposal puts forward several aspects previously identified by the Federation and provides a basis for further discussion, permanent solutions must be adopted to maintain banks’ current capital ratios without reducing their capacity to finance the economic recovery and to fund Europe’s digital transformation and sustainable transition.

The impact of €27 billion represents the capital shortfall needed to meet the minimum requirements but does not reflect the amount of capital that most European banks will have to raise in order to maintain the current capital ratio of 15%. Preserving such a level of financial assets has proven crucial for keeping households and businesses afloat during an unprecedented crisis like Covid-19. To ensure a well-informed decision, the EBF urges EU authorities to disclose the amount of capital necessary to restore the current 15% capital ratio after implementing Basel III.

The EBF notes the recognition of double counting of requirements in the EU regulatory framework. The national buffers constitute an additional layer of gold-plated rules, multiplying the buffer requirements and the complexity of the EU regulatory framework. The output floor should be applied only to the international buffers, as in other jurisdictions, but not to the additional national buffers only employed in Europe.

“European banks are committed to getting the Basel reforms over the finish line. The Commission’s package pinpoints the most relevant issues and topics for further discussion – now we need to get them right”, said EBF CEO Wim Mijs. “The Banking Package is a unique opportunity to achieve a deeper integration of the banking sector across Europe reducing the competitive disadvantage of European banks. To deliver an effective and balanced prudential framework for banks and our clients – European households and businesses – we must take concrete steps to clear away the gold-plated national buffers. We look forward to continuing our close collaboration with EU policymakers to accomplish this joint goal.”

EBF

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