EU Said to Weigh Bank Debt Rule Delay in Blow to Basel TimetableJim Brunsden
The European Union is weighing a one-year delay to the deadline for lenders to disclose whether they meet a debt ratio, in the latest blow to the global timetable for applying Basel bank rules, according to three people familiar with the discussions.
EU nations may seek to push the start date for mandatory disclosure of this so-called leverage ratio from Jan. 1, 2015, to Jan. 1, 2016, said the people, who couldn’t be named because the talks are private. The revised date was discussed by diplomats at a meeting today, they said.
The ratio is part of the package of international bank rules known as Basel III, which has become beset by delays as regulators across the world ponder how best to implement the measures, which more than triple the core capital lenders must hold and set standards for how lenders should manage risks.
The EU, like the U.S. missed the January deadline to start phasing in parts of Basel III. The Basel Committee on Banking Supervision, the international group that drew up the standards, agreed earlier this month to delay and water down another key part of the package designed to ensure banks have enough easy-to-sell assets in a crisis.
The possible delay to the leverage ratio was triggered by the EU’s failure to meet the January deadline. Officials will hold further talks on the timing for the leverage ratio and other parts of the Basel III rules in the coming weeks, two of the people said.
Governments and European Parliament lawmakers have sparred over swathes of the bloc’s draft Basel implementing law including banker bonus curbs, rules for systemically important banks and the leverage limit.
The leverage ratio would cap a lender’s debt at no more than 33 times its Tier 1 capital, a measure of its financial reserves. It would do this by requiring banks to hold capital equivalent to three percent of their loans, derivatives trades and other assets.
A total of 56 banks out of a sample of 209 would have failed to meet the leverage ratio had it been in force at the end of 2011, according to data published by the Basel Committee on Banking Supervision, the international group that drew up the standards. The lenders with shortfalls included 29 large international banks, the Basel group said.
The EU’s implementation timetable for the Basel rules is still under discussion and will need to be agreed on by governments and by the EU parliament, according to a spokeswoman for Ireland, which holds the rotating presidency of the EU.
Ireland is committed to reaching a deal on the implementing legislation as soon as possible, said the spokeswoman, who declined to be cited by name, in line with official policy.
Under the Basel plans lenders would have to show how well they meet the rule from Jan. 1, 2015, while the measure would become a binding requirement from Jan. 1, 2018.