Global banking reform must not cap capital buffers -Eurogroup hea… – Reuters


(Adds Slovak minister’s quotes, background)

By Francesco Guarascio

LUXEMBOURG Oct 11 New global banking rules
should not include set limits to increases in capital adequacy
requirements and should focus on improving banks’ internal risk
assessment models, the head of the euro zone finance ministers’
grouping said on Tuesday.

The Basel Committee, banking supervisors from nearly 30
countries, is due to complete its reform, known as Basel III, by
the end of 2016. The new rules are meant to make the sector more
financially sound by reducing reliance on internal risk models.

“The outcome of the process should be that we have good
quality standards for internal models and in the individual
cases of some banks it may lead to higher capital requirements,”
Eurogroup President Jeroen Dijsselbloem told reporters before an
EU finance ministers’ meeting that will address the issue.

European banks and regulators have warned against an
excessive increase in capital requirements that could affect
mostly European banks because they use internal models more than
their U.S. rivals, which rely more on standardised methodology.

Asked whether there should be a set limit to any hikes in
capital requirements, Dijsselbloem said: “My approach is
different”.

Reacting to France’s push for a 5-percent limit, he said:
“I haven’t heard it. It does not make sense.”

A proposal for a 5-percent limit was included in a EU
finance ministers’ draft statement but was removed from the
final conclusions of a meeting in July, as member states could
not agree on the issue.

When asked about the possibility of a set limit, the Slovak
finance minister Peter Kazimir, whose country holds the rotating
presidency of the EU, reminded reporters of the conclusions of
the July’s meeting, where ministers simply urged the Basel group
to avoid a “significant increase” in overall capital
requirements but set no limit.

“It must be done in an intelligent way,” Kazimir said on his
arrival to the EU meeting in Luxembourg on Tuesday.

Officials at banking trade body AFME estimated the new rules
were likely to increase the capital buffer held by lenders by at
least 6 percent on average. The French and German banking
federations said the capital requirement increase might reach 50
percent for some banks.

Two weeks ago, the EU commissioner in charge of financial
services, Valdis Dombrovskis, set the EU red line for the Basel
reform and openly criticised the text prepared by the Basel
committee so far.

After that speech, France, backed by Germany, requested the
EU Council to add a discussion on the Basel reform to the EU
finance ministers’ meeting.

(Editing by Alastair Macdonald and Louise Ireland)

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