Systemic buffers on agenda of three-way meetings
By Manon Malhère | Tuesday 12 June 2012
Negotiations on the reform of prudential rules for banks, known as CRD IV
(1) have been primarily limited to the technical aspects so far, but the European Parliament and the Council are set to enter into the heart of the subject during two three-way meetings, on 13 and 14 June in Strasbourg. On the agenda is the touchy question of systemic buffers.
After the 23 May three-way meeting, the EP and Council simply agreed to ask the European Commission to come up with wording that combines the proposals made by the two institutions.
The Council proposes a systemic risk buffer that authorises the member states to set tighter capital requirements for financial institutions. This would entail an additional ratio of at most 3% of risk-weighted assets, which would apply to all bank exposure without Commission oversight. The ratio could go as high as 5% under certain conditions.
The EP proposes more binding capital requirements for global systemically important financial institutions (GSIFIs) with an additional ratio of 3% that can go as high as 10%. These ratios would apply to all exposure. Apparently the Council has tabled the following compromise: an additional mandatory ratio of 1% for GSIFIs that the regulator could increase (0.5%) in terms of the type of systemic institution.
The two parties will also discuss the competences of the European Banking Authority (EBA), financial institution governance and crisis management issues.(1) The Commission presented a regulation and directive in July 2011 to implement Basel III