EU lawmakers push to tweak Basel bank capital rule
STRASBOURG, France (Reuters) - European Union lawmakers want to change how globally agreed bank capital rules will be applied in the 27-nation bloc, a move that risks a backlash in the United States.
A draft EU measure now being discussed by member states and the European Parliament puts into law the Basel III accord, the world's core regulatory response to the financial crisis to make banks safer.
All the EU's 8,000 lenders will have to comply when the requirements are phased in from 2013 over six years.
"The banks are not exactly looking solid at the moment," German center left lawmaker Udo Bullmann told the assembly's economic affairs committee on Monday evening.
The raging euro zone debt crisis has slammed into bank holdings of government bonds, with recapitalizations of lenders now widely seen by investors as necessary.
Othmar Karas, the Austrian center-right lawmaker sponsoring the bill in parliament, wanted to use "room for maneuver" in implementing Basel III.
"We should be able to say 'No' to the letter from some member states who want to go back to the original decision taken by the Basel Committee," Karas said.
Britain and a group of other EU states have warned Brussels not to water down Basel in Europe.
Vicky Ford, a Conservative UK member of the assembly, said against the backdrop of the euro zone crisis the EU measure will be watched very closely, especially for any sign it will be weaker than international standards.
"It would not be in the interests of any EU banks that the capital requirements directive would be sub-equivalent to Basel," Ford said.
The EU measure as drafted is seen by critics as opening the door to lower quality assets for inclusion in what are meant to be a bank's core buffers of top quality capital.
Karas is also against the automatic adoption of caps on how much banks can leverage their debt.
Ford said a U.S. bank has said the draft measure differed in 52 ways from Basel III and weaker in 34 of those instances.
U.S. policymakers have already been questioning whether Europe will apply the global accord properly, while some EU lawmakers doubt the United States will apply Basel III at all after failing to introduce its predecessor accord on time.
Britain has been lobbying Brussels so that it can require domestic banks to hold more than the 7 percent minimum core capital under the Basel rules.
The draft EU law would make the Basel standards a maximum level to ensure a consistent rule across the bloc, although with some flexibility for top ups.
Markets are already putting pressure on banks to comply sooner rather than later with the new rules to show they can withstand losses from falls in government debt prices in Greece and other euro zone countries that have convulsed markets.
Karas hopes for final approval of the EU measure next summer, giving regulators only a few months to flesh out 150 new rules to implement the law in time for its 2013 start date.
(Writing by Huw Jones; editing by Andre Grenon)