Dijsselbloem Seeks Tighter Leverage Rules for EU Banks

Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of 17 euro finance ministers, will seek stricter rules on leverage for banks across Europe.

Banks considered too big to fail should aim for a ratio of capital to assets of at least 4 percent, exceeding the 3 percent threshold proposed by the Basel Committee on Banking Supervision for 2018, Dijsselbloem said in a letter to the Dutch parliament published on the government’s website today.

The Netherlands will seek permission for governments to apply the rules nationally should they fail to agree on the common framework, Dijsselbloem said. “Further steps are needed to make the banking industry more solid and stable to ensure it can perform its role in the economy adequately,” he said.

The focus on leverage is the latest effort by financial watchdogs to prevent a repeat of the taxpayer-funded bank rescues of 2008. Regulators are facing resistance from lenders including Deutsche Bank AG and Societe Generale SA, who have issued stock, sold units or hoarded earnings to increase a different measure of financial strength known as the Basel III Tier 1 capital ratio which allows banks to weight their assets according to risk.

The leverage ratio for the biggest U.S. lenders would rise to 5 percent for parent companies and 6 percent for their banking units under a proposal by regulators in July. EU laws currently require banks to report how they measure up in terms of the 3 percent Basel ratio from 2015.

ING Groep NV’s banking unit, ABN Amro Group NV, Rabobank Groep and SNS Reaal NV’s lending arm have been defined as systemically important by the Dutch central bank.

Dutch Leverage

The leverage ratio of the Dutch banking industry, excluding off-balance sheet exposures that would have to be taken into account under Basel rules, has risen to almost 4 percent, Dijsselbloem said.

ING, the biggest Dutch financial-services company, said this month that its leverage ratio, defined as Basel III Tier 1 capital divided by total balance sheet exposure, including off balance sheet holdings, was 3.9 percent at the end of June. SNS, which was nationalized in February, said its ratio, excluding a property finance unit that will be split off, was 2.8 percent at the end of June.