Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

EU pledges 'faithful' application of global bank capital rules from 2025

EconomyOct 27, 2021 09:41PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, July 14, 2021. REUTERS/Yves Herman

By Huw Jones

LONDON (Reuters) - The European Union published draft laws on Wednesday to "faithfully" implement the final batch of tougher global bank capital rules from 2025, two years later than agreed internationally.

Following the initial batch of rules, banks in Europe hold roughly triple the amount of capital that they did in the run up to the 2007-09 global financial crisis that saw governments bail out collapsing lenders.

Brussels says its proposals would modestly increase capital requirements by less than 9% on average by 2030, but banks argue the hit will be bigger in practice and will make it harder for them to help the economy recover from COVID-19.

The European Parliament and EU states have the final say on the European Commission's proposals for transposing the 'Basel III' global bank capital accord, with haggling and tweaks likely.

"We are faithfully implementing the agreement on Basel III while taking into account some European specificities, and ensuring it does not lead to a significant overall increase in capital requirements," European Commission Executive Vice President Valdis Dombrovskis told reporters.

The EU's executive European Commission is proposing to start rolling out the changes from January 2025. The Basel Committee of global banking regulators, which wrote the rules, agreed last year to a 12-month delay to 2023 due to COVID-19.

Dombrovskis said a further delay was "realistic" given the time banks needed to prepare internal systems and finance recovery from COVID-19, with the EU still ahead of Britain and the United States in publishing proposals.

The Bank of England and commercial banks have called for global alignment on timing.

"We welcome the Commission's intention to extend the implementation date for the proposal until 1 January 2025 and strongly recommend that this is globally agreed on to ensure the simultaneous adoption of all proposals," said Michael Lever, head of prudential regulation at European banking lobby AFME.

Privately, banks worry that despite a delay, investors will want lenders to comply sooner rather than later.


Bigger banks will be allowed to continue using their own models to determine the size of capital buffers in an advantage over smaller lenders who must use more conservative calculations set by regulators.

But a new 'floor' sets a lower limit on capital from models, to be phased in over five years to 2030. Banks say the floor duplicates capital buffers imposed by national regulators, but Brussels rejected an industry workaround, noting safeguards to avoid duplication.

The impact of the floor specifically on loans to companies with no credit rating and on "low risk" home loans will be phased in over five to eight years.

EU guidance on how banks should disclose enviromental, social and governance (ESG) risks will be embedded into law along with regular stress testing, but banks fear regulators will impose a bespoke capital buffer to cover such risks.

The proposals also harmonise a patchwork of rules on how branches of foreign banks in the EU are regulated by introducing common approaches to supervision and authorisation. Some lenders see this as a first step to the forced creation of more expensive subsidiaries.

EU pledges 'faithful' application of global bank capital rules from 2025

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email