19 April 2012

Reuters: EU states split over tougher bank capital rules

EU states are split over how much leeway local supervisors should have to pile extra capital requirements on banks and keep markets stable. They are trying to reach a deal on new bank capital rules and comply with a January 2013 deadline to start phasing in a globally agreed accord on bank capital.

A British-led bloc of states wants flexibility to impose higher core capital buffers on local banks than the 7 per cent minimum under the Basel III accord. Austria, France and Italy said on Thursday they wanted a more harmonised approach.

While the Presidency had already proposed local supervisors could impose an extra "systemic risk buffer" of up to 3 per cent without needing approval from the EU, Britain and others remain sceptical this will be enough. On Thursday, the Presidency suggested this extra buffer could be as much as 5 per cent from 2015.

There were also splits over which definition of core capital to use, with Britain saying the EU should stick to Basel III, meaning only pure equity in practice. Other states want to include other types of instruments, as long as they meet a list of 14 criteria.

France, Germany and others wanted to push back by three years, to the start of 2018, the date for mandatory publishing of a bank's leverage ratio.

Bonus Cap

The assembly wants to go a step further and introduce a new curb on bank bonuses in the law, something EU states have not yet discussed. Parliamentary sources said there was cross-party support for a fixed salary to bonus ratio of 1:1 ahead of a vote by the assembly's economic affairs committee scheduled for next Wednesday when the ambassadors meet again.

"The 1:1 ratio is in the current draft of the compromise and, I believe, it will stay there for the vote", said the committee's chairman, British Liberal MEP Sharon Bowles. "Not everyone is universally happy with this ratio but it seems to command a majority", Bowles said. Some MEPs had pushed for a more draconian salary to bonus ratio of 1:0.75, while others wanted 1:2.

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