Brussels, 23/01/2012 (Agence Europe) - Othmar Karas (EPP, Austria), European Parliament rapporteur on the CRD IV prudential rules for banking, is intending to fight off any attempts to water down the bank capital and leverage effect ratio reporting requirements, commenting on Monday 23 January 2012, ahead of the submission to his report to an EP committee (which may adopt it in April), that he did not want to see any relaxing of the measures. It is hoped that final political agreement will be reached before the summer break.
The rapporteur had increased the high quality (core Tier 1) capital requirements, requiring banks to have at least 6% core Tier 1 capital by 1 January 2013, the date set by the G20 and the Basel Committee alike. Pointing out that the European Council requires the 91European banks sitting the stress tests to have at least 9% core Tier 1 capital, Karas said that the European Council calculated the thresholds in a different manner from the European Commission. Commenting on the timeline for debt and leverage ratios to be communicated to national supervisors, Karas said the Commission's recommended timing were appropriate, namely an observation period until 2017 and then compulsory publication in 2018, but no publication of figures until they have been finalised.
France and Germany are calling for less stringent capital requirements in order to ease the passage of the new CRD IV directive and lessen the impact on the real economy, explains a joint Franco-German document described in the Financial Times on Monday. The two countries are calling for special, lenient treatment for banks active in the insurance industry, like France's Crédit Agricole. France and Germany want the debt ratio reporting date to national supervisors to be 2018 rather than 2015, but British supervisors recommend publication in 2013. France and Germany say that the new bank rules have to take account of their negative impact on the real economy.
Karas sympathises with this argument, saying that money has to be lent on to the real economy and it was important to ensure that the new rules did not lead to a credit squeeze for business and consumers. He suggests a substantial cut in the amount of capital banks must hold to balance out their loans to small business, suggesting that the weighted risk of loans to small business could be cut from the current 75% to 30%. The Commission has asked the European Banking Authority for its thoughts.
As much harmonisation as possible. Lothmar Karas wants the CRD IV legislation to be the first step in as much harmonisation as possible to create fair rules and reduce the ability of countries to go it alone, thereby reducing the massive danger of risk being offloaded onto shadow banking (unregulated banking). Several countries, including the UK and Spain, want to apply stricter rules that those set at EU level in order to shore up financial stability. Karas said that Austria and Sweden want the Basel III rules (that the CRD IV will introduce into EU rules) to come into force in 2013.
The European Commission wants as much harmonisation as possible. Speaking in the City of London on Monday, EU Internal Market Commissioner Michel Barnier said: “I believe our proposals strike the right balance between common standards for all, in the interest of both consumers and banks, and flexibility to adapt to national specific requirements. The Commission will publish a consultation document on shadow banking later this spring. It will be the first step of a process that could - eventually - lead to legislative proposals that we intend to propose during the first half of 2012 a consumer/retail investor package”. A conference on shadow banking will be held in Brussels on Friday 27 January. The Commissioner pointed out that a group of banking experts has been set up, chaired by the governor of the Bank of Finland, Erkki Liikanen. (MB/transl.fl)