Europe Poised to Delay Basel Bank Trading Rules by a Year
June 12, 2024
Source: Bloomberg Law
• Delay comes as US continues to wrangle over the rules
• EU lenders fear being disadvantaged by early implementation
The European Union is set to delay key parts of global bank capital rules by a year, so that the bloc’s lenders will not be disadvantaged by continued wrangling over the standards in the US, according to people familiar with the matter.
The EU was due to implement the wider package starting Jan. 1, some seven years after the measures were agreed by regulators on the Basel Committee on Banking Supervision as the final part of rule-making designed to prevent a repeat of the 2008 financial crisis.
The EU now plans a later implementation for rules that affect banks’ trading businesses, since those activities are global in nature, said the people familiar with the matter, who asked not to be named because a decision hasn’t yet been announced.
“Given the uncertainty around the implementation of the standards in other jurisdictions, the Commission monitors the international developments and stands ready to act if necessary in specific areas,” said a spokesperson for the Commission.
The development is the latest blow to a landmark package that was already running two years behind schedule, prompted by the pandemic and demands by banks for an additional year of preparations. Some regulators now fear that political backlash in the US, coupled with a European agenda that’s focused more on growth, could lead to a wider rowing back of the measures.
The EU has been under increased pressure over the so-called finalization of Basel III in recent months, with leaders including French President Emmanuel Macron arguing that Europe would disadvantage its banks by moving first. Deutsche Bank AG Chief Executive Officer Christian Sewing had also called on the Commission to act, citing the “fierce” international competition that European banks face.
Implementation of the full package would increase capital requirements for banks in the EU by 9.9%. In the US, they would go up even more, according to initial plans there.
The topic has since become a political flash-point, and US authorities are still fighting over what version of the wider package of measures, known in that country as Basel III Endgame, to agree on. They won’t implement the new rules before the middle of next year at the earliest. The UK has set a start date of mid-2025.
The EU hasn’t made a formal decision about a partial delay, but could do so in the coming weeks, with an announcement possible this summer, the people said.
The European Commission’s hard-fought package includes a provision for the EU’s executive arm to delay the portion that deals with banks’ trading businesses without going back to the European Parliament or governments. Those rules on so-called ‘markets risk’ account for 1.1 percentage points of the EU’s 9.9% increase in capital requirements, the EU’s impact analysis shows.
While implementation of the wider package remains scheduled for the start of next year, the Commission “has the power to delay or tweak the application of certain market risk provisions,” the spokesperson said. “The exercise of this power would not delay the implementation of all new Basel rules, but only the rules on market risk.”
Regulators have warned against a delay. Most recently, European Banking Authority chair Jose Manuel Campa told Bloomberg that the EU should push ahead with its timetable even if the US set a later date.
(Adds context on capital rules from fifth paragraph.)
To contact the reporters on this story:
Laura Noonan in London at lnoonan6@bloomberg.net;
Sonia Sirletti in Milan at ssirletti@bloomberg.net;
Steven Arons in Frankfurt at sarons@bloomberg.net;
Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story:
Tom Metcalf at tmetcalf7@bloomberg.net
© 2024 Bloomberg Industry Group, Inc. All Rights Reserved. Terms of Service
// PAGE 2
Europe Poised to Delay Basel Bank Trading Rules by a Year (2)
Christian Baumgaertel
© 2024 Bloomberg L.P. All rights reserved. Used with permission.
• EU lenders fear being disadvantaged by early implementation
The European Union is set to delay key parts of global bank capital rules by a year, so that the bloc’s lenders will not be disadvantaged by continued wrangling over the standards in the US, according to people familiar with the matter.
The EU was due to implement the wider package starting Jan. 1, some seven years after the measures were agreed by regulators on the Basel Committee on Banking Supervision as the final part of rule-making designed to prevent a repeat of the 2008 financial crisis.
The EU now plans a later implementation for rules that affect banks’ trading businesses, since those activities are global in nature, said the people familiar with the matter, who asked not to be named because a decision hasn’t yet been announced.
“Given the uncertainty around the implementation of the standards in other jurisdictions, the Commission monitors the international developments and stands ready to act if necessary in specific areas,” said a spokesperson for the Commission.
The development is the latest blow to a landmark package that was already running two years behind schedule, prompted by the pandemic and demands by banks for an additional year of preparations. Some regulators now fear that political backlash in the US, coupled with a European agenda that’s focused more on growth, could lead to a wider rowing back of the measures.
The EU has been under increased pressure over the so-called finalization of Basel III in recent months, with leaders including French President Emmanuel Macron arguing that Europe would disadvantage its banks by moving first. Deutsche Bank AG Chief Executive Officer Christian Sewing had also called on the Commission to act, citing the “fierce” international competition that European banks face.
Implementation of the full package would increase capital requirements for banks in the EU by 9.9%. In the US, they would go up even more, according to initial plans there.
The topic has since become a political flash-point, and US authorities are still fighting over what version of the wider package of measures, known in that country as Basel III Endgame, to agree on. They won’t implement the new rules before the middle of next year at the earliest. The UK has set a start date of mid-2025.
The EU hasn’t made a formal decision about a partial delay, but could do so in the coming weeks, with an announcement possible this summer, the people said.
The European Commission’s hard-fought package includes a provision for the EU’s executive arm to delay the portion that deals with banks’ trading businesses without going back to the European Parliament or governments. Those rules on so-called ‘markets risk’ account for 1.1 percentage points of the EU’s 9.9% increase in capital requirements, the EU’s impact analysis shows.
While implementation of the wider package remains scheduled for the start of next year, the Commission “has the power to delay or tweak the application of certain market risk provisions,” the spokesperson said. “The exercise of this power would not delay the implementation of all new Basel rules, but only the rules on market risk.”
Regulators have warned against a delay. Most recently, European Banking Authority chair Jose Manuel Campa told Bloomberg that the EU should push ahead with its timetable even if the US set a later date.
(Adds context on capital rules from fifth paragraph.)
To contact the reporters on this story:
Laura Noonan in London at lnoonan6@bloomberg.net;
Sonia Sirletti in Milan at ssirletti@bloomberg.net;
Steven Arons in Frankfurt at sarons@bloomberg.net;
Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story:
Tom Metcalf at tmetcalf7@bloomberg.net
© 2024 Bloomberg Industry Group, Inc. All Rights Reserved. Terms of Service
// PAGE 2
Europe Poised to Delay Basel Bank Trading Rules by a Year (2)
Christian Baumgaertel
© 2024 Bloomberg L.P. All rights reserved. Used with permission.