Brussels, 15/02/2012 (Agence Europe) - EU Internal Market Commissioner Michel Barnier announced on Thursday 14 February that the European Union and the United States had agreed on the need to introduce the Basel III bank capital requirements as quickly as possible. The requirements aim principally to strengthen banks' own funds. Barnier was in Washington for meetings with the United States' central bank (the Fed) and Treasury officials. Neither the US nor the EU have met their initial target of introducing the 2010 Basel III agreements into their legal systems by February 2013. The EU is expected to introduce the first Basel III rules a year late, with the entire process taking until 2019 to complete.
The Commissioner warned that the days of the Wild West were over, but regretted that some bankers felt the worst of the crisis was over and it was now business as usual.
The European Union is putting the finishing touches to the Basel III surveillance rules in EU Directive CRD IV, but there are still disagreements about bank bonuses that have delayed matters slightly.
The Irish Presidency of the Council of the EU unveiled a draft compromise on bank bonuses on Thursday that is quite close to the European Parliament's view (see EUROPE 10786), suggesting that variable pay should not be higher than fixed pay (a ratio of 1: 1), but if the majority of a bank's shareholders agree, then it can be increased to double the fixed rate (a ratio of 2: 1).
A close source says the Irish Presidency's compromise has been given broad backing by the member states, but there is uncertainty about how the UK will react. The same source says that new ideas from member states are being discussed, which the Presidency will be examining over the weekend, with a view to gaining consensus at member state level ahead of three-way institutional talks on Thursday. The source was optimistic about agreement being reached next week.
A different source says the UK is strongly opposed to the limits on bonuses suggested by the European Parliament, but Germany, which once seemed to line up with the UK on this, now gives the impression of having changed its mind and be moving towards the compromise position. The source says the Irish Presidency has asked London to make its position clear in writing so that Dublin can discuss it over the weekend. This source says it is far from certain that agreement will be reached at the three-way talks next week.
The same scepticism emerged from the European Parliament, where the chair of the Economic and Monetary Affairs Committee, Sharon Bowles, said she was not certain that the parties would be able to reach agreement next week.
Fed governor Daniel Tarullo says the United States is likely to issue a statement about progress in the spring.
Alongside the Basel III rules, the European Union has its own Banking Union plans to disconnect bank woes from sovereign debt. Several countries, namely Ireland, Cyprus and Spain, have been forced to go cap in hand for financial aid to bail out their banks. Ireland wants to ensure as much progress is made as possible in this domain during its presidency, which lasts until the end of June 2013. Barnier said that the eurozone bank supervision system (part of Banking Union) will be up and running on schedule in March 2014, and in the summer, the Commission will unveil draft legislation to set up a bank resolution authority. (EL/transl.fl)