Brussels, 27/07/2009 (Agence Europe) - The European Commission is carrying out a consultation, to continue until Friday 4 September, on the latest in a long line of revisions of the banking directive "Bâle II". It hopes to sound out interested parties on their reactions to the introduction of the concept of dynamic provisioning, in line with the conclusions of the most recent Ecofin Council (EUROPE 9936). A proposed directive is scheduled for October 2009. The Commission, which is well aware of the effect of an ongoing reinforcement of the rules on the availability of funds for granting loans to the economy, wants to know when it should timetable the entry into force of the intended measures, in order not to compromise the relaunch of the economy. Measures limiting the ability of banks to get into debt with leverage are not to be put to consultation.
The Commission explains that dynamic provisioning is not the same thing as own funds. The European institution suggests two methods for calculating the level of provisions to be held back from profits during periods of good economic performance, in order to cover losses anticipated on their credit portfolios. The former corresponds to the existing rules in Spain and the second to a simplified version of these rules. The Commission takes the view that it should be up to the Member States, as they experience different economic cycles at different times, to determine certain contra-cyclical factors, although a common methodology to define these will be needed at European level.
In order to promote the responsible issuing of loans, the Commission proposes to set strict obligations on the granting of mortgage loans for residential real estate and in a currency other than the one used in the country of the borrower. Increased capital requirements would apply in the event that the value of the loan exceeds 50% of the value of property, and banks would be obliged to hold the entirety of the capital required if the loan was equivalent to at least 100% of the value of the property. These measures would apply to loans granted solely once these new rules have entered into force.
Additionally, the Commission suggests a single definition at European level of the notion of defaulting (90 days), which would apply from the end of 2012. It is considering removing the option for the Member States to impose additional obligations for disclosing information to cross-border subsidiaries of financial institutions established on their territory (directive 1989/117/EEC) (M.B./trans.fl)