Regulators say EU to delay Basel bank capital rules

ROME/BRUSSELS Tue Dec 11, 2012 4:33pm GMT

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ROME/BRUSSELS (Reuters) - The European Union is set to delay introduction of new capital rules for banks by up to a year, the Bank of Italy said on Tuesday, in a move regulators fear could undermine one of the most important reforms of the financial crisis.

Many officials in Brussels had been expecting a delay following a U.S. decision to abandon the January 2013 target and in light of difficulties between EU countries and the bloc's parliament in finalising the rules.

Such a delay would deal a further blow to the global Basel III accord, which was struck by central bankers and regulators in a bid to make banks less risky. It requires banks to set aside more capital to cover losses such as unpaid loans and had been due to start from January 1, 2013.

"We are going towards a postponement of Basel III to the end of 2013, January 2014 at the latest," Bank of Italy Director General Fabrizio Saccomanni told a meeting of business leaders in Rome.

Other regulators forecast a shorter delay. Bundesbank board member Andreas Dombret saying he was confident Europe would introduce the rules "soon".

"If we are able to introduce Basel III in 2013, there should be no delay to the timetable for banks to build up their capital buffers by 2019," Dombret said.

Austria's Financial Market Authority co-head Helmut Ettl said there was a good chance the new rules could take effect from July 1.

In practical terms, supervisors and markets have put pressure on top banks to meet or even exceed Basel III's basic capital requirements well ahead of the phase-in period from January that was set by world leaders in 2010.

But uncertainty over the details and timing of the rules' introduction continues to rankle bankers.

European Union countries and lawmakers from the 27-member bloc's parliament meet on Tuesday and Thursday in what is likely to be their final attempt this year to sign off a law.

"A deal to my satisfaction looks highly unlikely," said Sharon Bowles, the British lawmaker who chairs the parliament's economic and monetary affairs committee.

SPLIT

The dispute centres on matters such as a demand by the parliament for rules capping banker bonuses at the level of their salary to be written into the new bank-capital legislation, but it is by no means the only outstanding issue.

"For people to suggest that the parliament is blocking it on remuneration is nonsense," Bowles told Reuters. "There are a trillion other things."

Her scepticism was echoed by Philippe Lamberts, a member of parliament also involved in the talks.

The new regime lays down higher standards in determining what kind of assets a bank can use to meet these capital levels. For example, it sets a limit on the use of hybrid debt that banks previously relied on, but which failed to avert the crisis.

By standardising EU capital rules, the law would also make it easier for the European Central Bank to supervise lenders, the first step towards a banking union, which is a cornerstone of closer fiscal integration in the euro single currency area.

But the European Union is struggling to agree on many aspects of the package, including what kinds of assets can be considered liquid, or available at short notice.

As well as a cap on bonuses, the European Parliament has asked for a fixed calendar to introduce a capital surcharge agreed globally for the world's biggest 28 banks and other measures to tighten the application of the capital rules.

"Basel III is very complex. There must be a question on whether it will be implemented," said Michael Cohrs, a member of the Bank of England's Financial Policy committee and former Deutsche Bank (DBKGn.DE) investment banker.

"That creates a problem. It creates an uneven playing field which bankers are very sensitive to," the former banker told a UK parliamentary commission on banking standards.

(Additional reporting by Claire Davenport in Brussels, Michael Shields in Vienna, Jonathan Gould in Frankfurt and Huw Jones in London; Editing by Will Waterman and Janet McBride)

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