EBF Urges One-year Delay in Introduction of Basel III

The European Banking Federation (EBF) is lobbying the European Commission to postpone the introduction of the Basel III global bank capital adequacy regime by a year to 2014, after US regulators earlier delayed application of the new requirements.

The EBF fears European banks could be at a competitive disadvantage if they implement Basel III first and is adamant it does want to see this happen.

According to
‘Reuters’
and other reports, the EBF issued a letter on 21 November to EU internal market commissioner, Michel Barnier, in which it formally requested that the application of Basel III be put back by a year to 1 January 2014 on the basis that EU banks would be at a competitive disadvantage if they introduced the new rules before their US counterparts.

“We are now very troubled over the possible repercussions that the most recent statement from the US Authorities may have for the international competitiveness of Europe’s banks,” the letter is reported to state, adding that EU banks face significant regulatory changes including new capital requirements and liquidity buffers, and the creation of a EU supervisory authority.

“All the while, our US competitors will not have matching obligations imposed on them in parallel, or in a foreseeable future,” it added.

On 23 November, German central bank vice-president, Sabine Lautenschlager, was quoted by German daily paper
‘Handelsblatt’
as saying that Germany could impose tougher regulations on US banks in Europe if the US did not participate in Basel III.

Any escalation of the dispute could add to the pressure on the Australian Prudential Regulatory Authority (APRA) to delay its planned 1 January 2013 introduction of the Basel III rules.

European banks have long complained that protracted negotiations on the new rules meant they would not have enough time to start implementing them from next year, as planned.

Now they have stepped up calls for a postponement, arguing the recent US decision to delay application of Basel III risked creating a trend whereby Europe tightens the regulatory noose around its banks while other jurisdictions hold back.

A spokesman for Barnier said the EU would seek a coordinated stance with the US. “We will wrap up negotiations in the coming weeks between countries and parliament (on Basel III) and Michel Barnier will seek clarity from the US and work for a coordinated US/EU approach. Basel III norms are important for sound and competitive banks in Europe.”

When asked about the possibility of a delay, the spokesman told
‘Reuters’
: “The important thing now is to conclude trilogue (talks between the Commission, EU countries and the European Parliament) so that the EU can start applying Basel III rules in 2013. In any case, the various norms come into force gradually up until 2019.”

The Basel III rules are meant to be phased in from 1 January 2013 but US regulators cast doubt on the timeframe due to a flood of industry comments on the proposals.

“Basel III must be postponed, full stop” said the head of Italy’s ABI banking association, Giuseppe Mussari, at a conference in the central Italian town of Gubbio: “Clearly there is no worldwide agreement, so we wouldn’t be starting on a level playing field.” 

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