EU proposes to phase in some bank capital rules – EU document

Quick read

(Reuters) - Banks in the European Union will get more time to adjust to new rules aimed at making sure that lenders hold enough capital against risky assets on their trading books, an EU document showed on Wednesday.

Earlier this year, global banking regulators at the Basel Committee published final standards for their overhaul of capital requirements to cover market-related risks in trading books.

The EU is due to propose next month a law to implement this and other changes to capital requirements made by Basel.

But instead of accepting Basel’s “big bang” 2019 start date for the trading book rules, the bloc’s executive European Commission is proposing a phase-in, a draft of the EU law seen by Reuters said.

“Own funds requirements for market risk… will be phased-in,” the document said.

Transitional arrangements will come as a relief to the banking sector.

It is the latest sign of how the EU is willing to deviate from global standards to ease pressure on lenders, some of which, like Italy’s Monte dei Paschi di Siena and Germany’s Deutsche Bank, are already struggling to convince investors that they hold enough capital.

Other changes to Basel’s standards include easier capital treatment of covered bonds to “prevent a potential significant increase in the capital requirements” to maintain lower funding costs for mortgage loans for housing and non-residential property.

Reporting by Huw Jones

European Union flags flutter outside the European Commission headquarters in Brussels