EU set to delay Basel bank capital rules


Published — Wednesday 12 December 2012

Last update 12 December 2012 3:29 am

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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.

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