Brussels, 02/09/2013 (Agence Europe) - The European Commission is planning to make shadow banks have a liquidity buffer and to ban them from requesting credit ratings from external agencies (see EUROPE 10905).
The Commission is planning to introduce compulsory liquidity buffers of at least 3% of the net assets of shadow banks, according to plans leaked to Agefi (which are still subject to change before their official publication on Wednesday). They take account of shadow banking's importance to the economy because monetary funds provide important short-term finance to banks, companies and governments across Europe. The idea is to ensure that they could survive a run on deposits in the event of a new financial crisis.
The Financial Times says that, although the financial industry is distinctly underwhelmed at the idea, German Green MEP Sven Giegold describes the 3% buffer for monetary funds as the bare minimum.
The Commission is reported to be planning to prevent monetary funds from relying on credit ratings from external agencies, forcing them to develop their own rating systems. Following a consultation exercise last year on the potential risk to financial stability of portfolio management techniques like repo and the leasing out of securities, Agefi says the Commission will be unveiling draft legislation shortly on securities ownership. The Commission is considering enlarging the definition of banks in order to cover bodies currently exempt from capital requirements.
Publication of the plans comes at a good time - ahead of a G20 Summit where global efforts on shadow banking will be discussed. Last weekend, the German chancellor, Angela Merkel, warned that she would be asking her colleagues at the G20 to come up with a stricter implementation timeline for the new shadow banking rules. Shadow banking accounts at present for at least 25% of the global financial system. (EL/transl.fl)