Brussels, 07/07/2009 (Agence Europe) - On Tuesday 7 July, German Minister for Finance Peer Steinbrück appealed for a temporary modification to the Basel II directive on capital requirements for banks in order to help prevent a drying up of credit to the economy. German concern focuses on the link between the rating of a financial asset held by a bank and the structure of own funds for the lending body. If the rating falls, the level of own funds in the bank could fall, as well as its ability to provide loans. Anders Borg, Swedish Finance Minister, declared: “A large majority of member states did not exactly share the same point of view”. The Commission was invited to present a report on the issue during the informal Ecofin Council at the beginning of October in Gothenburg.
This point was raised during a debate on the pro-cyclical character of safeguard rules and accounting standards, which led to the finance ministers' conclusions (EUROPE 9936). Mr Borg described these conclusions as “very strong” and called for the introduction of “dynamic provisioning” into European law, which compels the banks to “develop provisions from the profits obtained during favourable economic periods, in view of covering the expected losses to lending portfolios”. Mr Borg also observed a “clear commitment from the Council” on the need to reduce the pro-cyclical effect of pay policies that encourage excessive risk taking. Mr Borg added that the “public authorities have a role to play”, given the systemic implications and the imminent revision of the Basel II directive. (M.B./transl.rh)