The European Commission has presented this Wednesday a review of the EU banking regulations, as part of the transposition of the international Basel III agreements , which provide for an increase in capital requirements for banks of more than 26,000 million euros , according to the calculations of the European executive.
The objective, says Brussels, is to adapt European legislation to international frameworks; make financial institutions more resistant to possible shocks given the lessons of the 2008 financial crisis; prevent risks from being underestimated again; but that there is no significant increase in the requirements that could put the economic recovery at risk. For this reason, the Commission proposes that the entry into force of these measures be delayed to 2025 , two years later than planned, to give banks some margin to prepare, and include long transition periods.
With the new rules in the framework of Basel III, negotiated in the context of the G20, institutions will see an increase in the medium term in the long term -2030- of around 9% in the volume of funds that they must reserve to be able to face potential losses, far from 18.5%, if the EU had implemented the agreement to the letter. In 2025, during the transition period, the increase will be below 3%.
The revision of the legislation largely reflects the flexibility of the agreements to adapt the framework to the specific characteristics of the European banking sector, such as the importance of small and medium-sized companies in the European economy or the prevalence of low-risk mortgages. “We remain faithful to the agreement, while using the flexibility that we have, and certain one-off adjustments to reflect the specific characteristics of the EU economy, and of our banking sector,” explained Financial Services Commissioner Mairead McGuinness.
The reform introduces one of the main initiatives under the Basel agreement: the use of ‘minimum floors’ ( output floor ) to prevent banks from using their own models when calculating capital requirements. The Commission argues that internal models, which vary significantly from bank to bank even under the same circumstances, may underestimate the amount of capital banks need. “As this places a burden on European banks in particular, we plan to gradually introduce this threshold over a long period,” Executive Vice President in charge of Economics Valdis Dombrovskis said of the proposal.
Furthermore, the proposal obliges banks to adequately monitor and manage potential environmental, social and governance risks, to improve their capacity to absorb losses related to these phenomena. To ensure the smooth functioning of the package of measures, the Commission also extends the powers of the supervisory institutions, which will be able to assess whether managers “have the skills and knowledge necessary to run a bank” and, to avoid a repeat of scandals like Wirecard, “will now have better tools to monitor, financial technology groups, including financial technology groups. bank subsidiaries The reform also addresses the harmonization of the rules to which branches in Europe of banks from third countries are subject, until now largely dependent on national legislation.
“We have proceeded taking into account the specifics of the EU banking sector and avoiding a significant increase in capital requirements. This package will make EU banks stronger and more capable of supporting economic recovery and green transitions and digital, “has assured Dombrovskis.
The European Banking Federation has applauded the implementation of the reform but criticizes some of the proposals and warns of their potential impact on the sector. “Permanent solutions must be adopted to maintain banks’ current capital ratios without reducing their ability to finance economic recovery and to finance Europe’s digital transformation and sustainable transition,” the Federation said in a statement.