Brussels, 16/04/2013 (Agence Europe) - On Tuesday 16 April 2013, the European Parliament (EP) adopted, by a wide majority, the draft CRD IV legislation to increase the quantity and quality of bank capital requirements on 1 January 2014 by introducing into the European Union the Basel III international deal drawn up by the Basel Committee. The EU will be the first part of the world to do so.
Rapporteur Othmar Karas (EPP, Austria) said the vote was a success for the single market by creating single rules that will apply to 8,300 banks in Europe. He said it was important that banks funded the real economy and provided more bank loans to small businesses. Irish European Affairs Minister Lucinda Creighton said the legislation struck a good balance between the duty of banks to accumulate capital buffers and better protect their cash flow on the one hand and financing of the real economy on the other. EU Internal Market Commissioner Michel Barnier said other areas of progress had been achieved by the EP vote, like giving greater mediation powers to the European Banking Authority, introducing an extra own capital buffer for big banks, and the requirements that banks provide details to the bank regulatory bodies of their exposure to unregulated financial bodies.
Many MEPs welcomed the EP's approach in the talks with the member states. By working together, the political parties had been able to restore innovative bank bonus restrictions and transparency requirements for the financial industry. Udo Bullmann (S&D, Germany) said that citizens could trust the EP because it was looking after their interests, but he said he would have preferred the capital requirements to be better adjusted to the various degrees of bank risk. Philippe Lamberts (Greens/EFA, Belgium) said the EP had scored points and the banks had not been able to lay down the law so much to democratic powers. He slammed the French and German finance minsters for confusing their countries' interests with the interests of Crédit Agricole, BNP Paribas, Société Générale and Deutsche Bank. Lamberts praised the rapporteur's attitude, saying that he had gained a friend and Karas had acted as a real statesman though his ability to rise above party interests.
The only disagreements came from Godfrey Bloom (ELD, UK), who said the draft legislation would not solve any problems and that there should be a clear divide between business banks and retail banks.
Bonuses. For the first time in the EU, rules are being introduced on bank bonuses. This is due to the insistence of the EP because the European Commission's inital draft did not cover bonuses. To curb speculative risk-taking, the basic salary-to-bonus ratio will be 1: 1. This could be raised to a maximum of 1: 2, if approved by at least 66% of shareholders owning half the shares represented, or of 75% of votes if there is no quorum. To encourage bankers to take a long-term view, a minimum of 25 % of any bonus exceeding 100% of salary, must be deferred for at least five years. The new rules apply to non-EU banks with branches in the EU and EU branches doing business outside the EU. Corien Wortmann-Kool (EPP, the Netherlands) said the bonus restrictions were crucial for reducing risk. Barnier said banks cannot operate as if they were not part of the wider society. He said he would do what he could to get other countries to introduce similar bonus and transparency rules.
The main aspects of the legislation are that banks will have to increase their top quality own capital from 2% to 4.5% of total assets; capital requirements may be set of up to 8% of assets by the member states; banks will have to have a float of cash to cover liquidity needs for 30 days (the short-term liquidity ratio will be phased in by 2018); and transparency rules will require banks to provide country-by-country breakdowns of profits and taxes. (MB/transl.fl)