MEPs back capital requirement revisions to Basel III

Last week, the European Parliament's economic and monetary affairs committee adopted a resolution on the finalisation of Basel III, and it has now been carried by a large majority of MEPs.

If the revisions are accepted by the European Commission, Basel III rules will be revised to ensure European financial services firms do not face significantly increased capital requirements. A Parliamentary spokesperson said in an official statement that MEPs oppose higher capital requirements in order to promote a level playing field among banks globally by “mitigating, rather than exacerbating” the differences between jurisdictions and banking models, and ensure the EU banking model is not “unduly penalised”.

MEPs are concerned that the current draft reform package proposed by the Basel Committee might not adhere to this objective, and this could be damaging to EU citizens as banks play a key role in financing the wider European economy, serving as the main source of finance for households and enterprises large and small.

While the resolution was backed by a broad, bipartisan group of MEPs, dissent was voiced in some quarters. German Green representative Sven Geigold said it marked a “bad turning point” in the post-financial crisis world.

“For the first time, the committee has sided with those who against higher capital requirements for banks, and it is extremely unfortunate that the Parliament has sided with them too. The European banking sector is still weakly capitalized and overly complex, and many balance sheets are weak,” he added.

“Even thinly capitalised banks continue to pay out dividends, bonuses and high wages. The problems of shadow banks and too big to fail are still yet to be tackled seriously. While it’s legitimate that Europe insists its banking model is not hit unfairly by Basel rules, it is a severe mistake to side with the banking lobby that capital requirements are sufficient and should not be increased further.”

The resolution still needs to be voted in the plenary, and a discussion with the Commission in Strasburg is scheduled for next week.

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