BRUSSELS, Oct 27 — The EU today unveiled a new banking law to avoid a repeat of the 2008 financial crisis that delays key aspects of an internationally agreed deal.
The proposals are the European Union’s interpretation of the Basel III reforms of international standards on how banks evaluate credit and market risks.
Implementing the rules will require Europe’s biggest banks to keep more cash on their books, something that could lead to hundreds of billions of euros in additional costs.
The new rules, which were supposed to be active in 2023, would also force banks into providing greater transparency on their climate risks, with financing of fossil fuel projects, for example, evaluated poorly.
“The intention is to make sure that the rules are fully applicable as of January 1, 2025,” EU vice president Valdis Dombrovskis told reporters.
“This presents a realistic assessment of upcoming legislative process and the time to put the outcome of this process in place,” he said.
Europe’s banking giants have lobbied hard to limit the rules or put them off as long as they can, arguing that a decade of stricter capital requirements have already shrunk profits and curbed lending.
The commission’s proposal will now be negotiated with the European Parliament and EU member states, where the interests of the continent’s biggest lenders have a strong influence.
“While we must implement these agreements faithfully, it’s also very important that we take into account the specificities of the European banking sector,” an EU official told reporters on condition of anonymity.
For example, the commission argues that the current global rulebook for lending to small companies be allowed to apply longer in Europe, where firms are less prepared for the new regime.
In addition, Brussels says EU banks hold a high volume of low-risk home loans compared to their rivals in the United States and that too should allow for some leeway.
The financing of infrastructure projects, which in Europe is left mainly to banks, also needs special consideration, the commission said.
The EU’s regulators, including the European Central Bank, have pushed against the delay, arguing that the international deal must be fulfilled on time and to the letter.
“We consider it of paramount importance that the outstanding Basel III standards are implemented in full, and in a timely and faithful manner,” Andrea Enria, the ECB’s head of supervision, told MEPs this month. — AFP
