Enhanced and harmonised capital and liquidity requirements for banks: agreement reached on the finalisation of Basel III

07/12/2017

Today, the Basel Committee on Banking Supervision (BCBS) reached an agreement on the finalisation of “Basel III”, an international regulatory framework that places particular emphasis on enhanced and harmonised capital and liquidity requirements for banks.

Not new

However, a large part of the Basel III regulations already applies since 2014 and the BCBS has observed in various reports that the ambitious objectives on capital and liquidity requirements have largely been achieved in Europe. The same is true in Belgium: the results of a recent transparency exercise carried out by the European Banking Authority (EBA) show that the Belgian sector is capitalised more than the EU average.

Febelfin therefore shares the opinion of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the BCBS, stating that we must avoid that the finalisation of the Basel III gives rise to a new increase of the current capital requirements, since that could become a serious obstacle for the efficient funding of the current economic growth.

International

Basel III is a regulatory framework at the international level. In order to be legally-binding, the rules will have to be transposed into national law by jurisdictions all over the world, including Europe. Febelfin advocates in this context open and international cooperation to ensure the full transposition and the creation of a global level playing field.

However, the financial landscape is not the same everywhere. In Europe, the bank sector plays a significant greater role in granting credit and supporting the economy than in other parts of the world. Febelfin therefore calls on the European regulators to dedicate sufficient attention to the specific nature of the European bank sector and its competitiveness at global level when transposing Basel III.

Complex

It is now important to thoroughly analyse the impact of the finalised Basel rules. This will be a complex process. The agreement reached today provides for a gradual introduction of the rules through a phased implementation period. Febelfin invites the European and Belgian regulators to make full use of this period to place a thorough assessment of the cumulative effects as a key priority on the agenda, so as to clearly identify the consequences for the Belgian financial sector and economy.

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