ECB’s Angeloni Warns Against Blocking Global Bank Rules Deal

  • Supervisory Board member speaks in Bloomberg interview
  • Failure or delay in reaching agreement would send ‘bad signal’

Ignazio Angeloni.

Photographer: Martin Leissl/Bloomberg

A collapse in talks on revamped global capital rules for banks would be a serious mistake, a senior euro-area supervisor said as differences among major banking powers threaten to scupper a deal.

“Failure of the agreement, or a postponement, would send a very bad signal,” Ignazio Angeloni, a member of the European Central Bank’s supervisory board, said in an interview in his Frankfurt office on Thursday. While declining to comment on the outcome of a meeting of rulemakers in Santiago this month, he said negotiations aimed at putting an end to the post-crisis regulatory overhaul are “very uncertain and difficult.”

Regulators will meet from Nov. 28-29 in the Chilean capital to put the final touches on a set of international capital standards, known as Basel III, ahead of a year-end deadline. European regulators and politicians have signaled that they expect profound changes to the proposal by the Basel Committee on Banking Supervision, the international standard-setter. Germany’s Bundesbank has threatened to withdraw from the talks unless key demands are met.

For an idea of what a Basel compromise might look like, click here

“The post crisis phase has lasted 8 years, and we said many times that this phase of uncertainty should finish soon,” Angeloni said. “If we postpone, we send the opposite signal. I think it is in the interest of everybody to conclude.”

‘Narrow Path’

Bundesbank board member Andreas Dombret, who is also on the ECB’s Supervisory Board, said on Tuesday that Germany won’t accept a deal “at any price.” Bundesbank President Jens Weidmann, a member of the ECB’s Governing Council, said on Friday that the “timely implementation” of Basel III is important, but “the agreement also has to be regionally balanced.”

Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., another committee member, said the U.S. shouldn’t budge from stronger standards under European pressure.

European Union opposition to parts to the Basel Committee’s proposals centers on concern that the region’s banks will be faced with higher capital demands even as the deal delivers on a commitment not to significantly increase overall requirements globally.

“Some of the issues that emerged, during the crisis and after, regarding the use of internal models for evaluating a variety of risks, including operational ones, need to be addressed,” he said. “The Basel Committee will need to find an acceptable compromise along this narrow path.”

At the same time, Angeloni stressed that focusing on the effect on Europe as a whole would be the wrong approach.

Asymmetric Results

“Thinking about a quantitative average for Europe, you don’t solve the problem,” he said. “The effects can be very asymmetric across banks,” he said, adding that “this is one of the things that make these negotiations so difficult.”

The ECB and its supervisory arm, the Single Supervisory Mechanism, are both members of the Basel Committee, as are the U.S. Federal Reserve and Japan’s Financial Services Agency, among others.

Angeloni stressed that the ECB doesn’t expect to reduce capital requirements on the banks over which it has oversight.

“The Supervisory Board believes that an overall softening of capital requirements is not warranted, on the whole, for our supervised banks at this time,” he said. “. This means that we expect that banks will satisfy their capital guidance in full.”

Options, Discretions

Angeloni also urged the European Commission, the EU’s executive arm, to use the opportunity of a scheduled review of its banking law to remove the leeway that countries currently have in setting rules that diverge from the rest of the continent. The commission is due to present its proposed changes later this month.

“We see, as you would expect, action from governments to obtain special treatment for banks in some cases,” he said. “We really hope that the Commission will use this opportunity to move forward decisively in the harmonization of the national options and discretions.”

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