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Global regulators are changing how they treat the pan-eurozone exposure of lenders based in the bloc in a move which should allow France’s BNP Paribas to cut its capital requirements and make cross-border mergers easier in the region.
The shift, which was announced by the Bank for International Settlements on Tuesday, is a step towards harmonising regulations for the eurozone banking sector, which policymakers and politicians have been pushing for since the region’s debt crisis a decade ago. T
he biggest banks based in the 19 countries that share the euro will have their cross-border exposures within the bloc treated more like domestic ones under the c
hange, which could reduce the amount of extra capital they need to cover their systemic importance. The different treatment of capital requirements across member states has long been seen as a hurdle to cross-border mergers between eurozone banks, along with the lack of a common European safety net for depositors and delays in creating a single market for the sector.
Europe’s fragmented banking sector has fallen behind North American competitors since the financial crisis in terms of market share and profitability. Large domestic players such as UniCredit in Italy and Société Générale in France are widely considered most likely to participate in cross-border dealmaking once regulations are harmonised. The new rules agreed by the BIS will affect the calculation of extra capital buffers for the eight eurozone-based lenders included in the list of 30 globally systemically important banks that are considered most likely to trigger a financial crisis if they were to go under....
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