EU Eyes March 22 Deadline for Basel Law to Avoid Delays

The European Union must press ahead with global bank capital standards to avoid fresh delays and to give certainty to lenders that must abide by the overhaul, the bloc’s financial services chief said today.

“We need agreed rules as soon as possible so that banks know which way they are going,” Michel Barnier said in an interview on the sidelines of a conference in Paris.

Lawmakers and EU negotiators will meet tomorrow to try to break logjams over banker bonuses, financial reporting requirements and the amount of power retained by national regulators. An EU planning document warned the EU should finish its laws on the new rules by March 22.

If the measures aren’t finalized next month, the EU may run out of time to hit its January 2014 target date to implement the so-called Basel III accord, according to the Feb. 22 document drawn up by Ireland’s EU presidency and obtained by Bloomberg News. Missing the March deadline may force the EU either to shorten its transition period, putting undue strain on lenders to adjust by the start of next year, or delay starting the new bank rules until July 2014 or January 2015.

Barnier said he’s working “on the hypothesis there won’t be a delay” so the EU can stick to its schedule. He reiterated the Brussels-based commission’s goal of regulating when countries can set their own safeguards for lenders.

“The commission is very attached to having a working single regime,” Barnier said. He said EU lawmakers are focused on issues relating to banker pay.

Basel Delays

The EU, like the U.S., has struggled to agree on legislation to apply the international standards on capital, known as Basel III, which were published in 2010 as part of efforts to prevent any repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc.

After talks failed to reach a deal last week, Othmar Karas, the European Parliament’s chief negotiator on the measures, said this week’s talks would be the last opportunity to reach a deal using fast-track procedures.

The Basel rules negotiations also have been stalled on how much additional capital should be required for systemically important financial institutions, and on banker bonuses, according to the document. Ireland, which holds the EU’s rotating presidency, offered several possibilities for compromise, with no success so far.

“The European Parliament has not indicated any immediate positive reception towards any of these elements,” the document said. Options include allowing banks to “claw back” bonus pay or require longer-term compensation plans.

Core Capital

Lawmakers are pushing the EU to include in the capital rules a requirement for country-by-country reports on profits, losses and taxes, according to the document. Nations have been reluctant to expand the scope of the capital rules, preferring to tackle the topic in separate accounting legislation.

The Basel Committee on Banking Supervision brings together banking regulators from 27 nations including to the U.S., U.K., and China to coordinate their prudential rule-making.

The Basel III measures, which must be written into national laws, would more than triple the core capital lenders must hold and set standards for how lenders should manage risks.

Representatives of Karas and the Irish presidency in Brussels declined to comment on the paper.