According to the region’s banking supervisory authority, the European Union’s banking sector largely complies with stricter global capital rules designed to protect against economic downturns. The supervisory authority reported on Tuesday that EU banks only need to raise an additional 600 million euros by the 2028 deadline.
In 2017, the Basel Committee, a global regulatory body, introduced new capital rules requiring banks to maintain higher reserves as a safeguard against potential financial shocks. The move was part of the committee’s wider review of mandatory capital buffers following bank bailouts during the 2008 global financial crisis.
Now regions such as the EU, Great Britain and the United States are incorporating these final Basel requirements into their own regulatory frameworks. The European Banking Authority (EBA) recently published the results of the monitoring exercise carried out at the end of 2022. 157 banks in the EU participated in the study and evaluated their progress in implementing the Basel rules.
The Basel Committee set a deadline of 2028 for the implementation of the remaining rules, which must be introduced in the EU from January 2025. However, EU policymakers have proposed an extended implementation period for some rules and a temporary exemption for others, which could reduce the core capital shortfall to an estimated €240 million.
US regulators don’t want to finish work until 2028, and deployment will begin six months later than planned in Europe. British banks are lobbying to accommodate this delayed start date and to ease some rules in line with EU measures. The Bank of England is expected to finalize its Basel rules in 2024.
The Basel Committee reported on Tuesday that the global shortfall among banks needed to fully implement core capital rules was around €3 billion at the end of December 2022, compared to around €7.8 billion six months earlier. Similar to EU credit institutions, this represents only a small fraction of the banks’ total capital buffer and income.
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