Brussels, 30/04/2012 (Agence Europe) - EU27 finance ministers will be meeting on Wednesday 3 May for a special sitting of the ECOFIN Council to discuss the bank surveillance rules set out in the CRD IV package (a directive and a regulation) to increase the capital requirements for European banks under the Basel III agreements (see EUROPE 10602). They are expected to decide in first reading on two points and then enter negotiations with the European Parliament under the co-decision procedure. The Danish Presidency of the Council of the EU is optimistic that a compromise will soon be reached.
Additional funding buffer. The ministers are expected to decide on the amount of extra capital member states would be able to require of their banks, particularly big banks, over and above the Basel III funding requirements (7% of the balance sheet must be top-notch “Tier One” capital). This is an important issue because the additional cash would damage the full harmonisation of rules desired by the European Commission for the new legislation and if it is not properly managed, the new buffer funding would undermine the unity of the single market for financial services, or so its critics say, because it would introduce bank funding requirement competition among the member states. The Danish Presidency suggests a compromise of this buffer being limited to 3% of the exposure of the bank in question, without requiring any prior authorisation from the Commission, but permission would be required for anything above 3%. Two approaches are fighting it out here - maximum flexibility, as demanded by the United Kingdom, Poland, Sweden, the Netherlands, Spain and Bulgaria, which want to be free to set stricter funding requirements (an additional buffer of 5% without requiring special authorisation) and want to reduce the Commission's right of scrutiny; versus maximum harmonisation (France, Germany and Italy) along the lines of the Commission's initial proposals, but these countries would be prepared to agree to a buffer of 3% of exposure in the country where a bank has its headquarters, without prior authorisation from the Commission (authorisation would be required for anything over 3%). The second group of countries is said to be open to compromise, as long as the existing financial supervision set-up remains in place.
Leverage ratio. The other issue to be discussed is the year when banks will be forced to start publishing details of their leverage ratios (2015 or 2018). Under the Basel Agreements, this will become compulsory on 1 January 2018. The Danish Presidency agrees with the Commission's suggestion and suggests that banks should be forced to provide information so the leverage ratio can be calculated from 2015 onwards in order to satisfy countries that want rules to come into place right now. France and Germany oppose this, preferring to wait until 2018 to give enough time to decide exactly how the leverage ratio is to be calculated. The Commission is due to publish a report on this towards the end of 2016. (FG/transl.fl)