The EU Commission defends its plan to take into account the special features of the European economy and its banking sector when implementing the international banking rules (Basel III) in EU law. The EU will nevertheless “conscientiously” comply with the Basel framework, said Valdis Dombrovskis, Vice President of the Brussels Authority, who is responsible for the economy. He presented the proposal for the new banking directive on Wednesday together with Financial Market Commissioner Mairead McGuinness. The two commissioners emphasized that Basel III allows sufficient flexibility to do justice to the medium-sized structure of the European economy in EU law and not to jeopardize their financing through excessive bank capital requirements. Particularly strict regulations for institutes from third countries are also possible.The "core" of the Basel standards would still be met, said Dombrovskis.
Werner Mussler
Business correspondent in Brussels.
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Markus Frühauf
Editor in business.
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Important elements of the proposal had become known in advance (FAZ from October 8 and 22).
The Commission wants to anchor the core of the Basel framework, which consists of stricter capital requirements for banks and was decided in response to the global financial crisis in 2008, in European law.
Above all, this means that the Basel regulations for the use of bank-internal models for calculating capital requirements are to be implemented unchanged.
In the past, the use of these internal models often resulted in banks underestimating their capital requirements.
The "Output Floor" agreed upon in the Basel Committee is intended to counteract this.
It stipulates that the capital requirement calculated using internal models is at least 72.5 percent of the capital requirement calculated using the standardized approach for credit risks.
This means that the equity requirement calculated using internal models may only be 27.5 percent lower than the standard approach.
This limits the ability of banks to downgrade their credit risks using internal models.
Capital requirements remain within limits
Admittedly, the Commission also wants, as requested by the EU member states and the European Parliament, to forego "noticeably" higher capital requirements for European banks on average. By the end of the planned long transition period in 2030, the institutes would have to raise an average of less than 9 percent additional capital, said the EU authority. If the “European peculiarities” had not been taken into account, the plus would have been more than twice as high. At the beginning of the transition period in 2025, the increase will be just under 3 percent.
According to Joachim Wuermeling, who is responsible for banking supervision on the board of the Bundesbank, the minimum requirements for German banks will only increase by an average of 6 percent. According to him, there is sufficient equity in the German banking system to meet these needs. German institutes currently hold EUR 365 billion in equity in order to meet minimum regulatory requirements. These increased by 20 billion euros in the course of the EU implementation of Basel III.
This is already offset by excess equity of 165 billion euros, so that German banks hold a total of 530 billion euros in equity.
However, warned Wuermeling, individual institutes that had previously relied heavily on internal models could not avoid increasing their equity.
An example of this can be Deutsche Bank, which is known to have relied on internal models.
Loan supply unimpaired
Overall, Wuermeling assumes that the credit supply in Germany will remain unaffected by the Basel rules.
Should individual institutes have to hold back, other competitors could step in.
Corporate financing will not become more expensive.
After all, real estate financing would not be made more difficult.
Overall, Wuermeling was satisfied with the Commission's proposal.
With the Basel framework, internationally uniform standards would be created and the switch to countries with more lax requirements would be prevented.