Saturday

17th Apr 2021

Lawmakers aim to bridge gap on bank capital regime

EU lawmakers are hoping to resolve their differences on legislation toughening bank capital rules to prevent a repeat of the 2007-9 financial crisis.

MEPs will hold their next trialogue negotiations with the Irish presidency on Tuesday (February 19) in a bid to secure agreement on the Capital Requirements directive (CRD IV).

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The legislation, which establishes the minimum levels of core capital held on the balance sheets of European banks, tackles what many regard as the core of the financial crisis. It also includes rules limiting bank bonus payments.

Othmar Karas, the Austrian centre-right MEP responsible for piloting the legislation through Parliament, told reporters earlier this week that "political agreements" had been reached on all of the main issues in the bill and indicated that member states would be responsible for any new delays.

But others have downplayed the prospect of a swift agreement. Sharon Bowles, the Liberal chair of the Economic committee, commented that she was "not sure we will get a deal on Tuesday," while a national official involved in the talks told this website he was "confident there won't be a deal."

The EU and US have already missed the original January deadline to begin the implementation of Basel III, but are expected to apply the regime from January 2014.

Speaking in Washington on Thursday (14 February), Internal market commissioner Michel Barnier told reporters that he and US Federal Reserve Governor Daniel Tarullo had "agreed it was essential that effective implementation of the new regulatory framework should be done as soon as possible".

MEPs are set to secure the agreement of governments to put in place a strict cap on bankers' bonuses. Under a compromise proposal put forward last year under the Cypriot presidency, bonuses would be capped at salary levels, with dispensation to pay bonuses up to 2:1 against salary only allowed with the support of a majority of voting shareholders. An official involved in the talks indicated that Britain was among the few dissenting voices on bonuses.

Meanwhile, governments want to be responsible for setting national supervision regimes to take account of the demands of their banking sector and to have sufficient flexibility to impose tougher capital requirements. The European Commission, supported by MEPs, wants to give the London-based European Banking Authority the final say over implementation.

There is also disagreement between the two institutions on the dates for the phasing-in of short-term liquidity rules. However, officials have suggested that a possible trade-off could involve ministers accepting the parliament's timeline on short-term liquidity in exchange for member states' stance on supervision.

The Irish presidency plans to put the deal to EU finance ministers on 5 March, with a view to MEPs voting on the package at either the March or April plenary sessions.

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