Brussels, 30/04/2009 (Agence Europe) - On Wednesday 6 May, during its final plenary session of the current legislature, the European Parliament will vote on the report by Othmar Karas (EPP-ED, Austria) on the revision of directive 2006/48/EC on lending institutions' capital requirements. Adoption of the legislative proposal is still blocked over the level of securitised assets banks are required to retain under European legislation, which they sell on again in the financial markets. These complex financial products are difficult to evaluate because the assets underwritten by sub-prime mortgages helped create the international financial crisis when US real estate plunged, and provoked heavy losses amongst the banks forcing them to appeal for a bale-out from public coffers to stop them going under.
The European Commission proposed that lending institutions retain at least 5% of securitised assets in their accounts (EUROPE 9572). At the end of November 2008, the Council defined a general guideline granting a brief to the French Presidency to negotiate the level of a similar requirement with the European Parliament (EUROPE 9787). In its draft report adopted at the beginning of March (EUROPE 9858), the EP's economic and monetary affairs committee approved the minimum 5% threshold but suggested an alternative to obligatory retention of securitised assets, based on the provision by a bank of an “explicit and unconditional” guarantee proving its respect for vigilance requirements. During the informal trialogues, the EP delegation quickly abandoned this guarantee idea. Nonetheless, it did obtain a revision clause requesting that the Commission increase by the end of 2009 the retention rates for securitised assets, following consultation with the Committee of European Securities Regulators (CESR) and depending on how discussions progress at an international level on a review of banking regulation. Several MEPs in the EPP-ED Group were initially hostile to the wishes of Socialist MEPs to set a rate of 15% but recently said that they were open to such a proposal. With their line now appearing to depend on adoption in a first reading of the Basle II directive review, negotiations are expected to take place at the beginning of next week in Strasbourg.
The Parliament and the Council agree on requesting: - the setting up of a college of national supervisors for all cross-border bank institutions; - the limitation of bank exposure through a ban on lending more than 25% of its capital to a single counterpart; - the presentation of legislative proposals to set up in the EU a central compensation agency for the credit default swaps market. In June, the Commission will be proposing a new review of the Basle II directive (EUROPE 9837). (M.B./transl.rh)