LISBON, June 25 (Reuters) - The Bank of Portugal urged central banks in Portuguese-speaking Africa to raise supervision standards to the European banking union’s tougher requirements to avoid capital cost hikes for European banks in Africa.
Bank of Portugal Governor Carlos Costa, who is also a member of the European Central Bank governing council, said on Thursday that so-called Basel 3 rules for risk-weighted assets would have an impact in all these countries, marking a division - “a before and after the creation of the banking union”.
In 2012, euro zone governments agreed to transfer responsibility for most large banks to the European Central Bank to make sovereign debt less dependent on countries’ banking systems, helping to prevent contagion and new debt crises.
Basel 3 rules are being implemented in phases, the latest having kicked in from the start of this year.
“It is in the common interest that we align the practices with the more demanding banking union rules. I’m not talking just about Portugal, all institutions in the banking union are interested in and would benefit from supervision equivalence,” Costa told a meeting of Portuguese-speaking central bankers.
Portuguese banks are working actively in former colonies like Angola and Mozambique, where they churned out profits in the past few years in contrast with the domestic activity that was undermined by Portugal’s recession and debt crisis.
In December, Portugal’s second-largest listed lender, Banco BPI, which controls Angolan bank BFA, took a 90-basis-point hit on its solvency ratio after the European Commission excluded Angola from a list of countries where regulatory rules are equivalent to the European Union’s.
“A European bank ... with an affiliate in a country that is not part of the banking union has its capital requirements and financing costs conditioned by the level of recognition of the local supervision,” Costa told the meeting, which did not discuss his suggestion.
“The less recognised it is, the higher the capital costs, and naturally, the higher the financing costs will be for the economy,” he added. (Writing by Andrei Khalip; Editing by Tom Heneghan)