Valdis Dombrovskis, a vice-president of the European Commission, said Brussels would not accept any reforms that “lead to a significant increase in the overall capital requirements shouldered by Europe’s banking sector”. Current plans being considered by global regulators needed work in a “number of areas”.
The comments come at a time of mounting market pressure on European institutions, with the capital position of Deutsche Bankand Monte dei Paschi in particular focus. [...]
The problems in the sector have prompted a debate about how European banks can be strengthened and whether their business models are viable.
Andrea Enria, chairman of the European Banking Authority, which carried out the stress tests, told a conference on Wednesday that European governments should consider whether public funds “could be part of the ingredients” deployed to help clean up bank balance sheets. [...]
“Basel revisions should recognise that in a number of areas, markets in Europe face different challenges than elsewhere,” Mr Dombrovskis said. “Equalising average risk weights across the world cannot be the answer.
“We want a solution that works for Europe and does not put our banks at a disadvantage compared to our global competitors,” he said. [...]
A particular faultline between the EU and US concerns Basel plans to impose a so-called standardised capital floor on banks. The floor would limit how low a bank’s capital requirements could fall compared with what they would have been under an alternative system for measuring risks that has been devised by regulators.
The intention of the rule is to prevent banks being unrealistically optimistic about the quality of their investments. [...]
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