The positions of the European Parliament and the Council of the European Union are still far apart on the level of application of the minimum capital requirements, called the ‘output floor’, the representatives of the two EU institutions had noted on Tuesday 18 April during the second trilogue negotiation session on the finalisation of the integration of the so-called ‘Basel III’ banking prudential standards in the EU.
According to Parliament, this output floor, which will apply to European banks using an internal model to calculate their risk-based capital requirements, should be applicable at the consolidated level of a banking group (see EUROPE 13106/19). According to the EU Council’s position, this minimum capital level could instead be set at the level of each financial institution. However, a Member State retains the possibility of applying an output floor at the consolidated level of the entities of the same group located on its own territory.
During the trilogue, the Swedish Presidency of the EU Council indicated that it had no margin on this point. Considering that the European Parliament’s approach was more in line with the internal market, rapporteur Jonás Fernández (S&D, Spanish) asked the Presidency whether the EU Council was ready to examine different options, as otherwise an Interinstitutional Agreement would be very difficult to reach. According to the Swedish Presidency, no national government would answer this question positively.
The possibility of entrusting the European Commission with the task of examining several options was initially envisaged, but was not activated.
On the other hand, progress has been made on transitional provisions that will apply until 2032 to take account of the specificity of the EU banking sector and to limit capital requirements for banks’ exposure to, for example, unrated companies, low-risk mortgages and financial derivatives. The European Parliament and the EU Council seem to be moving towards a legislative text that clearly spells out the end of the transitional periods by means of dates.
The positions of the two EU institutions remain far apart on whether national competent authorities should assess ex ante the ‘fit-and-proper’ nature of a person being considered for a top position in a large systemic bank. MEPs are in favour of this, but not the Member States.
The Swedish Presidency argued that such provisions would be administratively burdensome, while the existing rules at Member State level are, in its view, working well.
On the supervision of branches of third country banking groups active in the EU, positions have barely converged, with the Commission being tasked with preparing options for further negotiations. The Swedish Presidency stressed that competence for systemic risk remains national, a situation which the Commission did not contradict. For the rapporteur, the provisions applicable to these institutions should mirror those applicable to branches of European banks operating in third countries. (Original version in French by Mathieu Bion with Anne Damiani)