14 May 2012

ECON Committee: Bank capital rules - Reform to boost risk resilience and lending to the real economy

"The outcome of the vote is a very strong statement by Parliament to the Council that all political parties are determined to go ahead with stabilising banks and financing growth. The new capital requirements are not only a pivotal piece of banking regulation, but a law to finance the real economy. The main challenge is to find the right balance. We must have the banks build more solid security buffers and finance the growth needed now in the real economy. Parliament wants to facilitate SMEs’ access to finance with the new rules”, said rapporteur Othmar Karas (EPP, AT).

New rules for resilience

The proposed legislation would require banks to hold enough capital to protect themselves against unexpected losses. "Systemically important" banks would be required to hold a supplementary capital buffer of 3 per cent, which could be raised to 10 per cent if this were considered necessary by the authorities. The capital requirements system would thus be more flexible, but should also be better supervised by EU Member States' competent authorities, in collaboration with the European Banking Authority (EBA), whose supervisory powers would be extended.

Better-governed banks

Under the new rules, every financial institution would be required to have "robust" governance agreements, including consistent lines of responsibility, effective processes for identifying and managing risks, and sound and fair remuneration policies.

Bankers' pay should be consistent with effective risk management, not encourage unjustified risk-taking and reflect real-world performance, say MEPs. Bankers' bonuses must not exceed their fixed salaries, they add.

Lending to small firms and consumers

To boost growth and job creation, MEPs inserted new rules to reduce the risk weighting of loans to small and medium-sized enterprises (by 30 per cent) and also of loans to start-ups.

Next steps

Member States and Parliament negotiators will now enter into negotiatons in the coming days to hammer out a deal between the two sides.

Press release

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