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As the European Parliament begins debating the implementation of globally-agreed bank capital rules, European Conservatives and Reformists group member, Vicky Ford MEP, has warned that markets and investors will not reward EU banks if policymakers try to water them down.
The Capital Requirements Directive (CRD) will see its third revision (making it the CRD4), in order to implement international capital requirements standards agreed in Basel.
She also warned that the Basel standards of a seven per cent minimum core capital requirement for banks should be seen as a minimum standard, rather than a maximum one as envisaged in the draft proposals. She warned that national governments may wish to further raise capital requirements on their banks in order to deal with asset bubbles.
Ford said: "The markets are watching both the EU and the USA very closely to see how we implement the new Basel agreement. Both sides of the Atlantic must not seek to water down or obfuscate their commitments, which will help to restore some much-needed confidence in the banking sector.
"It is not in the interests of European banks for us to introduce sub-Basel rules in the revision of the Capital Requirements Directive. Of course there needs to be some variation to suit the specific needs on both sides of the Atlantic, but these differences should not be seen as an opportunity for embedding bad practices.
"Markets and investors want EU lawmakers to get this right. If we do not, it is our banks and our markets that will take a further hit from the fall in investor confidence."