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Banking Standards, Proposed by Global Bank Regulator, Demanded to be Softened by the EU

Banking Standards, Proposed by Global Bank Regulator, Demanded to be Softened by the EU
In an effort to protect lenders and the economy from major new costs, the European Union is raising the pressure on global banking regulators to ease proposed capital rules.
A chorus of resistance from EU regulators and policy makers including German Finance Minister Wolfgang Schaeuble would find another voice in the form of the European Parliament who will add its voice next week to the demands. To ensure that the new rules won’t drive up capital requirements or exacerbate differences between countries, lawmakers are planning a Nov. 10 vote on a resolution that urges international standard-setters to ensure these demands.
“We want to give this clear message before the standard is defined and we will be called to transpose it” into EU law, said Roberto Gualtieri, head of the parliament’s Economic and Monetary Affairs Committee. He said in a Nov. 3 interview in Berlin that ensuring that there is a “level playing field” between U.S., European and other jurisdictions is the aim of the lawmakers.
Demands for changes to the rules that determine how banks assess the riskiness of assets and how much capital they need as a result have been made by European agencies for some time now and the planned vote is the latest step in an increasingly public campaign by European politicians and regulators for the changes. In relation to how to put the final touches on changes to the post-2008 crisis rule book, these proposals have become a flash point between regulators from Tokyo to Washington.
Attempts to get the standards completed by the end of the year are being made by the Basel Committee on Banking Supervision, whose members include the European Central Bank and U.S. Federal Reserve. Increase overall capital requirements significantly in the process, the committee pledged in January.
Sweeping changes to the standards have been called for by the European Commission, the EU’s executive arm. Meanwhile, raising the threat of fragmentation in global regulation and going so far as to say they wouldn’t adopt the proposals on the table unless alterations were made, some European officials at a Basel Committee meeting in September vehemently opposed the standards and demanded changes.
Hundreds of billions of dollars in additional capital charges would be the result of how they assess credit, operational and market risks, the banks have warned. Writing letters to regulators, giving speeches and warning about the impact of the rules on earnings calls all year, European banks including HSBC Holdings Plc, Deutsche Bank AG, Societe Generale SA and Credit Agricole SA have led the global lobbying campaign against the proposals.
The promise to avoid a significant increase in capital requirements and to preserve the level playing field should be respected by the Basel Committee’s revision of capital standards, stresses the parliament in a draft of the resolution.

The draft states that the assembly “is concerned that the reform package at its current stage might not be in compliance with those two above-mentioned principles, and calls on the ECB to ensure their respect in the new standard.”

Christopher J. Mitchell

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