13 November 2012

Bloomberg: EU officials draft some compromises on Basel bank law

Officials and lawmakers said a deal on the legislation was in sight following negotiations yesterday in Brussels. The measures, known as Basel III, would more than triple the core capital that lenders must hold as a buffer against insolvency, and require banks to meet minimum liquidity rules. The European Parliament has called for curbs on banker bonuses, too.

It’s “possible and probable” that there will be an agreement on the draft law before the end of the year, Michel Barnier, the EU’s financial services commissioner, told ministers at a meeting in Brussels today. The main outstanding issues are capital surcharges for systemically important banks and bonuses, he said.

Yesterday’s negotiations were a “major step” toward a deal, Barnier said. Governments should “redouble their efforts" to secure a final agreement with lawmakers, he said.

The rules, prepared by the Basel Committee on Banking Supervision, toughen the definition of what types of reserves banks can count toward their core capital. The international accord also sets minimum amounts of easy-to-sell assets that banks must hold to survive a credit squeeze, and standards on stable funding for lenders.

Draft political compromises were reached on 16 points discussed at yesterday’s meeting, Othmar Karas, the lawmaker leading the parliament’s work on the rules, said after the talks. He said he hoped the remaining issues can be resolved at meetings next week in Strasbourg, France.

Barnier said that further curbs on bonuses are “justified and necessary” and that he backed the parliament’s planned ban. Nations should “raise their level of ambition” on bonus curbs, he told reporters today. He also warned nations against seeking too much freedom to adopt bank capital rules that are tougher than those required by EU law.

Sweden’s Finance Minister, Anders Borg, said that flexibility for national regulators to set tougher capital rules had been a key part of a negotiating position agreed on by finance ministers in May. “It’s very important we stick to the general principles of the agreement”, Borg said at today’s meeting.

USregulators announced last week that they wouldn’t meet the 2013 deadline.

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