Brussels, 01/06/2011 (Agence Europe) - EU Internal Market Commissioner Michel Barnier is on an official visit to Washington from 1-3 June, where he will be discussing with his US counterparts implementation of the G20 international financial reform roadmap. In a letter to US Treasury Secretary Tim Geithner leaked to the Financial Times, Barnier says that the drawing up of fair rules must be put into practice rather than being an empty slogan. The Commission says the letter simply sets out the areas that the commissioner would like to discuss, namely bank regulations, bonus policy, derivatives, financial rating agencies and international accountancy standards. The aim of these regular EU-US meetings is to avoid leaving loopholes in the new rules on either side of the Atlantic or any juxtaposition of rules. With equivalent, but not identical, rules on either side of the Atlantic, there will be less temptation for financial institutions active in both to cherry-pick the most advantageous legal system.
Barnier welcomed the repeated pledges by the United States to apply the international Basel III Agreement drawn up by the world's leading central bankers and bank regulators on the Basel Committee (see EUROPE 10213). The agreement increases the quantity and quality of bank funding requirements from now until 2019. Europe is worried, however, that the US never actually applied the previous agreement, Basel II, in full. The European Commission itself has come in for criticism recently over its legislation to transpose Basel III into EU law (see EUROPE 10388). Seven member states accuse it of taking a heavy-handed approach aiming at as much harmonisation of solvency ratios as possible. On the other hand, the Financial Times says that the draft directive due to be unveiled in a month's time introduces more flexibility in how lower quality capital (hybrid capital) can be used, and greater flexibility for financial conglomerates. Barnier has rejected all criticism, saying that the Commission would be aiming high for Basel III, which will apply to 8,000 banks in the EU, but not building societies (although they are covered in the United States).
Bonus policy. Barnier pointed out that since the end of 2010, the EU has been applying binding rules on the award of bonuses to bank managers. He said that the approach used in the United States (non-binding rules) left banks with too much room for manoeuvre, allowing them to wriggle around the rules set by the G20. (M.B./transl.fl)