On Monday 2 September, the Chair of the Single Supervisory Mechanism (SSM) at the ECB, Claudia Buch, warned against any delay in the European Union in implementing the ‘Basel III’ package strengthening banking prudential requirements, including the provisions relating to the market activities of investment banks (‘FRTB’), the application of which is expected to be postponed by one year, to January 2026 (see EUROPE 13460/9).
“It is crucial that [the Basel III package] is applied without further delay”, said Ms Buch in an exchange with the European Parliament’s Committee on Economic and Monetary Affairs. In her view, the level of additional capital requirements is “well below” the initial proposals and “the transition periods are long ” in order to meet the new requirements.
Asked by Kira Marie Peter-Hansen (Greens/EFA, Danish) about the recent proposal to postpone the prudential rules governing market activities by a year, Ms Buch said she understood the “political reasons” behind the Commission’s proposal. But if the rules were to come into force according to the initial timetable, i.e. at the beginning of 2025, “I don’t think that the European banks concerned would significantly lose ground compared to their competitors”, said the former Vice-President of the Bundesbank.
Irene Tinagli (S&D, Italian) asked the Chair of the European authority responsible for the direct supervision of the major European banks within the banking union to clarify which aspects the EU legislator should keep as close as possible to the European Commission’s initial ‘CMDI’ proposal aimed at strengthening the banking crisis management framework (see EUROPE 13437/4).
Ms Buch believes that it is “crucial” to be able to guarantee an effective transition in a crisis situation and to facilitate coordination between supervisors when a bank is declared to be failing or likely to fail. “When you delay for too long, the bank can face a haemorrhage in terms of liquidity and it becomes difficult to find the best option between resolution and liquidation”, she explained. It is also important to avoid anything that could compromise the “credibility of a bank resolution”, as this would create “bad incentives” for banks to take risks.
Asked by Johan Van Overtveldt (ECR, Belgian) about the risks posed by the shadow banking sector, Ms Buch advocated regulating the potential risks emanating from a sector that is poorly regulated despite its systemic size, in order to increase the “transparency and liquidity” available in the event of a crisis.
Lastly, Ms Buch pointed to the solidity of the European banking sector, which reached an optimal average CET1 capital ratio of 15.7% in early 2024. She also indicated that between 2015 and March 2024, the average level of non-performing bank loans as a proportion of total outstanding loans had been reduced from 7.5% to 2.3%, with the initial marked differences between EU countries having faded. (Original version in French by Mathieu Bion)