European Commissioner for Internal Market and Services, Michel Barnier, shares his thoughts on Bank Capital Requirements with John Rega, Chief Correspondent MLex FS.
First topic on the agenda is the temporary recapitalisation of banks. The aim of this measure is to bring the biggest banks in Europe – transnational banks with systematic dimensions – up to a 9% level of high quality capital. The Commissioner further elaborates on the current systems of national guarantees, with coordination taking place on the EU level.
Second point of discussion is the implementation of Basel III, the worldwide regulatory standard on bank capital adequacy, stress testing and market liquidity risk. Mr Barnier argues that EU implementation still suffers from a dichotomy between Brussels and London. The first looking for harmonization, while ‘The City’ is rather cautious in protecting its financial industry. Nevertheless, the EU is looking after structural implementation. Currently 8300 banks in the European Union – which finance 75% of the economy – are obliged to Basel III, while only 300 in the US are constrained to it.
Finally, attention is paid to SIFIS – Systematically Important Financial Institutions – which need an additional level of capitalization as well, besides more specific measures with regard to good internal and external supervision.