Brussels presents a proposal for the implementation of stricter banking rules

BRUSSELS (dpa-AFX) – The EU Commission wants to grant banks long transition periods for the implementation of stricter capital rules. This emerges from legislative proposals for the implementation of the “Basel III” reform that Finance Commissioner Mairead McGuinness and Economic Commissioner Valdis Dombrovskis presented in Brussels on Wednesday. Overall, banks in the European Union would have to set aside up to 8.4 percent more capital by 2030 in order to counteract risks.

The “Basel III” reforms were initiated by the EU and the G20 countries after the financial market crisis of 2008/2009 in order to reduce risks in the financial system and to be better prepared for future crises. “Today’s proposal ensures that we meet the core elements of the international Basel III standards. This is important for the stability and resilience of our banks,” said Dombrovskis.

An important part of the legislative package revolves around the handling of loans for companies that are not rated by rating agencies. Small and medium-sized companies in particular do not receive such a credit rating that indicates how risky it is to invest in them. The Commission therefore proposes that banks need to set aside more capital when lending to unrated companies. The institutes should gradually implement this by 2032. Critics had previously warned that the measures could lead to funding bottlenecks for small and medium-sized enterprises.

The legislative package also deals with how banks calculate their risks. Some of the institutes use their own models to calculate equity capital requirements. Critics say that banks pay off nicely as a result. The reform now stipulates that banks are only allowed to use their own calculation models to a limited extent. The Commission gives them five years to do this.

The legislative proposals will now be presented to the European Parliament and the EU member states. You can still make changes before the package is approved – but that may take some time ./dub/DP/eas

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