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“We welcome it that the EU trialogue parties have at last taken a major step towards agreement on implementation of Basel III in Europe. The introduction of the new Basel III capital and liquidity rules is the centrepiece in efforts to safeguard financial market stability. We private banks hope that the European Parliament, Commission and Council will now move quickly to reach agreement on the remaining unsettled issues. Banks have been waiting for a long time for the planning certainty they need on contents and timetables. It is important to adopt the rules swiftly and to push ahead quickly with drafting the European Banking Authority (EBA) technical standards needed for implementation. 1 January 2014 doesn’t leave much time to translate the whole package into national legislation and implement it in technical systems and operational processes.
A positive aspect is that the compromise makes due allowance for the special European circumstances. This is reflected in the definition of capital and, likewise, in the treatment of loans to small and medium-sized enterprises. The reduced capital charges for such loans takes account of the special role that SMEs and their funding play in the European economy.
At the same time, it is unfortunate that an agreement has been thwarted for so long by issues that have nothing to do with the Basel III rules. Banks are already required today to make sure that fixed and variable pay are appropriately balanced. This requirement is in line with the Principles for Sound Compensation Practices drafted at the request of the G20. So the rigid cap on performance-related bonuses in relation to fixed salary must be criticised. It comes at the expense of Europe’s competitiveness as a financial centre and represents undue disempowerment of bank owners. It is a missed opportunity to explicitly allow owners to set bonus levels themselves.
The private banks also fail to understand the agreed far-reaching scope for individual EU member states to deviate from the rules on capital requirements. On the one hand, this encourages a fragmentation of European banking regulation, while, on the other hand, government leaders decided in December to set up a European banking supervisor under the roof of the European Central Bank. A single European rulebook, as originally intended, is something different.”