EU set to delay Basel bank capital rules

Updated 12 December 2012
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EU set to delay Basel bank capital rules

ROME/BRUSSELS: The European Union is set to delay introduction of new capital rules for banks by up to a year, the Bank of Italy said yesterday, which regulators fear could undermine one of the most important reforms of the financial crisis.
Many officials in Brussels had been expecting a delay following the recent US decision to abandon the January 2013 target and in light of difficulties between EU countries and the bloc's parliament in finalizing the rules.
"We are going towards a postponement of Basel III to the end of 2013, January 2014 at the latest," Bank of Italy Director General Fabrizio Saccomanni told a meeting of business leaders in Rome.
The delay deals a further blow to the global Basel III accord, which was struck by central bankers and regulators meeting in Basel, Switzerland, in a bid to make banks less risky.
The accord requires banks to set aside more capital to cover losses such as unpaid loans and had been due to start from Jan. 1, 2013.
Austria's banking supervisor said it also expected a delay, though only until the middle of next year.
"We assume that it will certainly happen in the course of 2013," Financial Market Authority co-head Helmut Ettl told reporters. "I think there are good chances that the whole thing can take effect from July 1."
In practical terms, supervisors and markets have put pressure on top banks to meet or even exceed Basel III's basic capital requirements well ahead of the phase-in period from January that was set by world leaders in 2010.
European Union countries and lawmakers from the 27-member bloc's parliament meet on Tuesday and Thursday in what is likely to be their final attempt this year to sign off a law.
"A deal to my satisfaction looks highly unlikely," said Sharon Bowles, the British lawmaker who chairs the parliament's economic and monetary affairs committee.
The dispute centers on matters such as a demand by the parliament for rules capping banker bonuses at the level of their salary to be written into the new bank-capital legislation, but it is by no means the only outstanding issue.
"For people to suggest that the Parliament is blocking it on remuneration is nonsense," Bowles told Reuters. "There are a trillion other things."
Her skepticism was echoed by Philippe Lamberts, a member of parliament also involved in the talks.
"Besides remuneration, there are many substantial points still open, which make it increasingly difficult to reach a political deal this year," he said.
The new regime lays down higher standards in determining what kind of assets a bank can use to meet these capital levels. For example, it sets a limit on the use of hybrid debt that banks previously relied on, but which failed to avert the crisis.
By standardizing EU capital rules, the law would also make it easier for the European Central Bank to supervise lenders, the first step toward a banking union, which is a cornerstone of closer fiscal integration in the euro single currency area.
But the European Union is struggling to agree on many aspects of the package, including what kinds of assets can be considered liquid, or available at short notice.
As well as a cap on bonuses, the European Parliament has asked for a fixed calendar to introduce a capital surcharge agreed globally for the world's biggest 28 banks and other measures to tighten the application of the capital rules.


Costa Coffee to go solo pressed by investors

Updated 53 min 46 sec ago
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Costa Coffee to go solo pressed by investors

LONDON: Latte king Costa Coffee is to go it alone following pressure from activist shareholders on Whitbread, the global coffee chain’s parent company, a statement said Wednesday.
UK company Whitbread, which will hold onto hotel chain Premier Inn, said the spin-off is part of a restructuring drive that is set to be completed within two years.
“Given the progress Whitbread is making, we are confident that both Premier Inn and Costa will soon be businesses of sufficient strength, scale and capability to enable them to thrive as independent companies,” Whitbread chief executive Alison Brittain said in the statement.
“The board, therefore, believes that it is in the best long-term interests of Whitbread’s many stakeholders to separate Premier Inn and Costa, via a demerger of Costa,” she added.
Analysts welcomed the move.
“A cleaner operation should enable greater operational focus and afford investors greater clarity on profit and cash generation,” said analyst Greg Johnson at Shore Capital.
Whitbread’s announcement comes after activist investor, US group Elliott last week became its biggest shareholder with a six percent interest.
“The question will of course arise over whether CEO Alison Brittain jumped or was pushed into this proposal by the arrival of two activist investors on the shareholder register,” said Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers.
Whitbread bought Costa in 1995 from founders Sergio and Bruno Costa and presently runs about 2,400 stores in the UK and some 1,400 around the world.
Its shops are popular with a wide array of coffee lovers, ranging from students in London, to journalists and Beirut, and tourists in Paris.
Premier Inn has 785 hotels in the UK plus some more in Germany and the Middle East.