Brussels, 25/04/2012 (Agence Europe) - Member states' ambassadors to the EU, on Wednesday 25 April, discussed the CRD IV legislative package, which seeks to incorporate the Basel Committee agreement strengthening the level and quality of banks' own resources (see EUROPE 10601). It will be for finance ministers to determine, when they meet on 2 May, the level of optimum quality own funds that member states will be able to impose on systemic banks established within their borders, in addition to the capital level (7% of total balance sheet) required by the Basel agreement, and only in cases of exposure to specific risks on the national market.
In its draft compromise, the Danish Presidency of the Council of the EU suggests that the level of additional own funds could be as much as 5% of the financial commitments of a systemic bank located in a country imposing such a requirement. Above the 5%, Commission authorisation will be required. On Wednesday, Ireland, Finland, the Netherlands, Latvia, Sweden, Cyprus, Estonia and Lithuania backed this proposal. The United Kingdom, the lead in a group of countries that would like to see flexibility in the European legislation, was joined by Poland in opposing any role whatsoever for the Commission in this area. Sweden is of the view that calculation of additional own funds must not be conducted solely on the basis of exposure to risks observed in the country imposing extra requirements. Luxembourg was not against the 5% threshold, on condition that the remainder of the legislative package is maintained. Germany, like Greece, said it needed more time to consider the matter.
On the grounds of preserving the internal market, three countries rejected the Danes' proposed compromise which would put the introduction of a single rule book in doubt. Italy made it a matter of principle. France feared that the UK argument - that the additional systemic risk cushion is seeking to eliminate the moral unknowns inherent in banking systems - is in fact an attempt to undermine banking integration in Europe. France says that this rule, which the industry also rejects, would call into question the principle of consolidated oversight of cross-border banking groups. It would force these groups to reduce their balance sheets in branches established in other countries, with an attendant risk for the financing of the economy, and it would also encourage regulatory competition among member states. On this line, Belgium and the Commission recommend maximum harmonisation. (MD/transl.rt)