LONDON (Reuters) - The European Union is confident that a deal on how much capital banks must hold to avoid a repeat of the financial crisis can be reached in January, a top official said, as policymakers and global banking regulators iron out their remaining differences.
The rules aim to inject consistency in how banks tot up risks on their books to determine how much capital they should hold to remain stable.
The EU has threatened to boycott the rules proposed by the global Basel Committee of banking regulators if they lead to big increases in capital requirements.
Basel’s meeting in Chile last week failed to reach agreement, leaving the committee’s oversight body to thrash out a deal in early January.
Olivier Guersent, head of financial services at the EU executive’s European Commission, said it was important to have global banking standards that are complied with to avoid the failures that caused the financial crisis.
Instead of having “very ideological” discussions under Basel’s chairman Stefan Ingves, Europe looked at the “facts” to find agreement on aspects of the rules, Guersent said.
“Yes, we need to have an agreement. It would be bad news if we don’t get an agreement by the end of the year of the beginning of next year,” Guersent told a Politico event.
“We stand a reasonable chance to get an agreement at this meeting or before. There are still a number of points on which we disagree, but you never get everything you want in negotiation.”
But it would not be a problem to deviate from Basel rules if Europe thought they were not suited to its economy, a view U.S. Congress would also take in similar circumstances, Guersent said.
The January meeting of Basel’s oversight body coincides with the inauguration of Donald Trump as U.S. President, whose stated policy is to scrap a financial crisis-era reform of Wall Street known as Dodd Frank, saying it has crimped economic growth.
Guersent said finance was a global sector that benefits from global rules agreed at the height of the financial crisis by the Group of 20 economies (G20).
“The EU and U.S. have been the key driving force in putting forward the G20 agenda. We know why exactly we did it - because of the 2009 crisis,” Guersent said.
“I don’t think the Americans have forgotten this. They may even make adjustments to their system, but I don’t really believe they will massively roll back on what they have been doing.”
Reporting by Huw Jones, editing by Louise Heavens