EU Flash: March Ecofin meeting, reduction of NPLs and consultation on the impact of Basel III finalisation

29/03/2018

On March 13th, the European Ministers of Finance met in the Economic and Financial Affairs Council (Ecofin) to discuss a draft directive on transparency requirements for intermediaries, as well as the EU’s list of non-cooperative jurisdictions. The European Commission presented measures for further reducing non-performing loans and launched an exploratory consultation to assess the impact of recent amendments to the Basel III framework.

Below you can find a summary of these topics.

March Ecofin Meeting

On March 13th, the EU Finance Ministers reached an agreement on transparency requirements for tax intermediaries. Moves have also been made to improve transparency in the listing process for non-cooperative jurisdictions in taxation matters.

Corporate tax avoidance

The EU Finance Ministers reached an agreement on a proposal to prevent corporate tax avoidance. The draft directive will require intermediaries such as tax advisors, accountants and lawyers to report potentially aggressive tax planning schemes.

Member states will be required to automatically exchange the information they receive through a centralised database, as well as to impose penalties on intermediaries that do not comply with the transparency measures.

The Council will adopt the directive without further discussion once the text has been finalised. Member States will have until 31 December 2019 to transpose it into national laws and regulations. The new reporting requirements will apply from 1 July 2020. Member states will be obliged to exchange information every three months.

EU list of non-cooperative jurisdictions in taxation matters

In order to achieve optimal tax transparency worldwide, the Council adjusted the EU's list of non-cooperative jurisdictions in taxation matters. This list is intended to promote good governance in taxation worldwide, maximising efforts to prevent tax avoidance, tax fraud and tax evasion.

Bahrain, the Marshall Islands and Saint Lucia are removed from the list because they made commitments at a high political level to remedy EU concerns. Implementation of their commitments will be carefully monitored.

The Bahamas, Saint Kitts and Nevis and the US Virgin Islands are added to the list because they failed to make commitments at a high political level in response to all of the EU's concerns.

Nine jurisdictions remain on the EU list: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago and the US Virgin Islands. These jurisdictions are strongly encouraged to make the changes the EU requires.

Non-performing loans

The European Commission presents measures to speed up the ongoing reduction of non-performing loans (NPLs) in the European banking sector and to prevent them from building up again in the future. In addition, the Commission also presented its second progress report on the reduction of NPLs in Europe, showing that the decline of NPL stocks is continuing.

This package sets out a comprehensive approach with a mix of complementary policy actions that target four key areas:

  • Ensuring that banks set aside funds to cover the risks associated with loans issued in the future that may become non-performing.

  • Encouraging the development of secondary markets where banks can sell their NPLs to credit servicers and investors.

  • Facilitating debt recovery: banks and borrowers can agree in advance on an accelerated mechanism to recover the value from loans, without going to court.

  • Assisting Member states in the restructuring of banks, by providing non-binding guidance for establishing Asset Management Companies (AMCs).

Exploratory consultation on Basel III finalisation

The European Commission launched an exploratory consultation to gain specific input from stakeholders on the impact of recent amendments to the Basel III framework.

The consultation focusses on the last piece of post-financial crisis banking regulatory reform that was agreed by the Basel Committee on Banking Supervision in December 2017. The consultation aims to gather views from interested parties on the potential impact that amendments may have on the EU banking sector and the wider economy, as well as to highlight possible implementation challenges.

The implementation of this agreement in the EU would require amendments to current banking regulations, in particular the Capital Requirements Regulation (CRR). Before considering such amendments, the Commission will carry out a thorough impact assessment, in accordance with its Better Regulation agenda. The results of this consultation will inform the Commission's overall assessment.

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