EU may refuse to sign up to new banking rules: sources

Mon Sep 26, 2016 10:51am EDT
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By Andreas Kröner, Jonathan Gould and Huw Jones

FRANKFURT/LONDON (Reuters) - The European Union may opt out of new global rules aimed at preventing another financial crash because officials are worried they put European banks at a disadvantage at a time when they are losing market share to U.S. rivals.

European regulatory and banking sources said the rules, nicknamed "Basel IV" by bankers because they are an addition to "Basel III" capital rules that are already in place, unfairly penalize Europe's banks.

U.S. regulators, and other supporters of the proposals, say they are needed to make sure banks have enough spare capital to match the amount of risk they have taken.

The plans would change the way banks assess risks on their balance sheet, which then determines how much capital they must hold as an emergency buffer.

EU officials say the changes will make European banks and their large loan portfolios look more risky, and hence need more capital, than U.S. banks which provide more bond financing and package mortgages on for trading elsewhere.

"If we can't reach a compromise that's acceptable for us, we have to pull the emergency brake and opt out," a European regulatory official said on condition of anonymity due to sensitivity over the Basel talks.

"Nobody wants that, because it would damage the trust in European banks and regulators. But it's clear that there are red lines for Europe."

The Basel Committee, a group of global regulators, which drew up "Basel III" capital rules after lenders were rescued by taxpayers in the 2007-09 financial crisis, wants the extra changes to be agreed by the year end.   Continued...

European Union (EU) flags fly in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 3, 2015. REUTERS/Ralph Orlowski/File Photo