23 August 2013

Bloomberg: Dijsselbloem seeks tighter leverage rule for EU banks than Basel

Banks considered too big to fail should aim for a ratio of capital to assets of at least 4 per cent, exceeding the 3 per cent threshold proposed by the Basel Committee on Banking Supervision for 2018, Dijsselbloem said in a letter to the Dutch parliament published on the government’s website.

The Netherlands will seek permission for governments to apply the rules nationally should they fail to agree on the common framework, Dijsselbloem said. “Further steps are needed to make the banking industry more solid and stable to ensure it can perform its role in the economy adequately”, he said.

The focus on leverage is the latest effort by financial watchdogs to prevent a repeat of the taxpayer-funded bank rescues of 2008. Regulators are facing resistance from lenders including Deutsche Bank AG and Société Générale SA (GLE), who have issued stock, sold units or hoarded earnings to increase a different measure of financial strength known as the Basel III Tier 1 capital ratio which allows banks to weight their assets according to risk.

The leverage ratio for the biggest US lenders would rise to 5 per cent for parent companies and 6 per cent for their banking units under a proposal by regulators in July. EU laws currently require banks to report how they measure up in terms of the 3 per cent Basel ratio from 2015.

ING, the biggest Dutch financial-services company, said this month that its leverage ratio, defined as Basel III Tier 1 capital divided by total balance sheet exposure, including off balance sheet holdings, was 3.9 per cent at the end of June. SNS, which was nationalised in February, said its ratio, excluding a property finance unit that will be split off, was 2.8 per cent at the end of June.

Full article

© Bloomberg