Bloomberg News

EU Lawmakers and Nations Clash Over Basel Bank Capital Rules

July 12, 2012

European lawmakers and national governments are split over how much to toughen capital requirements for the bloc’s largest banks, according to two people familiar with the matter.

The European Parliament is negotiating with Cyprus, which holds the rotating presidency of the EU, over a draft law that would boost the reserves lenders are forced to hold in the 27- nation region.

Legislators are demanding that European authorities can impose capital buffers for so-called systemically important banks on top of any national requirements, said the people, who asked not to be identified because the talks are private. This has set up a clash with governments, which prefer that regulators apply whichever is the tougher out of the EU and local rules.

Governments face a January 2013 deadline set by the Basel Committee for Banking Supervision to implement the draft law, which would more than triple the core capital that lenders must have to 7 percent of their risk-weighted assets. The Group of 20 nations said banks should boost their reserves to prevent any repeat of the wave of taxpayer bailouts that followed the 2008 collapse of Lehman Brothers Holdings Inc.

Nikos Christodoulides, a spokesman for Cyprus’ EU presidency, said he couldn’t comment as talks on the draft law are ongoing. Any proposal must be approved by national governments and the parliament before it can take effect.

Summer Recess

Legislators and Cypriot officials held negotiation meetings yesterday and today in an effort to make some progress before the assembly breaks for its recess on July 20, the people said.

Adoption of the law after the break would leave lenders with little time to implement the measures, Guido Ravoet, chief executive officer of the European Banking Federation, said in an interview. “That seems to us not really realistic.”

The European Parliament has called for banks to face a range of capital surcharges above the 7 percentage point minimum, depending on their level of systemic importance.

Governments, in their compromise on the plans, took a different approach, saying regulators should be free to impose extra requirements of as much as 3 percentage points of core capital across the banking systems.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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