Brussels, 19/05/2011 (Agence Europe) - EU Internal Market Commissioner Michel Barnier wants binding liquidity rules in the upcoming draft EU directive to change bank capital requirements (the CRD 4 Directive). After the ECOFIN Council in Brussels on Tuesday 17 May, he said it was essential to introduce liquidity measures right now, adding that the draft CRD 4 would require all banks to have access to the required liquidity at all time - the said liquidity to be monitored by national bank supervisors. Recognising the huge impact this would have on financing for the real economy, Barnier pointed out that work was ongoing on the size of the capital requirement. The Basel III deal (named after the Basel Committee on improving the quality and quantity of bank capital), which has now been taken on board by the G20, introduces transition phases for complying with the requirements (see EUROPE 10213). The draft CRD 4 will transpose the Basel III agreement into EU law.
Barnier's statements have done little to calm nerves in the banking industry. In a joint letter, BusinessEurope and the European Banking Federation urge the Commissioner to pause and reflect on the introduction of minimum capital ratios and liquidity rules in the EU because of unintended consequences. They explain: “The two liquidity ratios as presently proposed by the Basel Committee on Banking Supervision aim to avoid in future a significant credit contraction in difficult economic times, but have been recognised ceteris paribus to lead to substantial liquidity and funding shortfalls. The Committee of European Banking Supervisors (CEBS) (Ed: the forerunner of the European Bank Supervision Authority) calculated these gaps to be in the order of €1.8 trillion (long-term funding) and €1 trillion (short-term liquidity) for Europe, amounting to approx. 15% and 8% of EU GDP respectively.” (M.B./transl.fl)