Reuters: Bankruptcy News: EU Basel 3 slip-up unlikely to derail capital-boosting plans

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EU Basel 3 slip-up unlikely to derail capital-boosting plans Aug 2nd 2012, 11:54 By Helene Durand Thu Aug 2, 2012 7:54am EDT LONDON, Aug 2 (IFR) - European banks are unlikely to slow down their efforts to comply with the new global regulatory standards despite a slip-up by European rulemakers in getting Basel III guidelines transposed into law. A delay in the European Parliament plenary vote on the so-called CRD IV and the recent statement by the Rapporteur of the European Parliament, as well as the discussion of the Council of Economic and Finance Ministers, mean that it is clear the legislation will not be adopted earlier than Autumn 2012, the UK Financial Services Authority said in a statement release on Thursday. The news did not come as a surprise for many bankers, who said that noises coming from Europe in recent weeks were that the trialogue between the various European institutions involved in the process had been heavy going. The sticking points have been on whether member states will have flexibility to impose additional measures in such areas as high capital requirements on banks, remuneration, crisis management, sanctions, the balance of powers between the authorities of "home" and "host" countries, corporate governance and powers to be given to the European Banking Authority. It is now unlikely that CRD IV legislation, which implements Basel III in Europe, will enter into law on January 1 2013. "All the big banks are preparing for Basel already, mainly because they are under such scrutiny and pressure from the market to comply anyway," said a senior banker. "We have seen banks being quizzed or voluntarily telling investors how their capital ratios would look on a fully phased-in basis." In its second-quarter results, BNP Paribas was the latest bank to give tell investors that its Common Tier 1 ratio would be 8.9% under fully loaded Basel III. In early July, Credit Suisse announced a set of capital boosting measures, which again aim to help the Swiss bank comply with regulatory requirements, ahead of the deadline set by regulators. It is not just investors keeping up the pressure on banks. "The FSA will continue to undertake all preparatory work that is possible in the absence of finalised legislative text, in full expectation that the EU legislation will follow the Basel III implementation timetable," the UK regulator said in its statement. "We expect all firms in the scope of CRD to do likewise." Banks will have to maintain sufficient loss-absorbing capital to protect them against losses, a cushion which "may temporarily be above that implied by the official transition path to Basel III", the FSA said. LITTLE IMPACT ON HYBRIDS Bankers agreed that the slip-up in the implementation date is unlikely to have much impact on the long-awaited revival of the hybrid Tier 1 market for European banks, which many still see as months away for the majority of issuers. "It does push things back further and it will probably remain difficult to get sign-off from regulators, although you would hope that this delay will make them a bit more pragmatic," said a hybrid solutions specialist. "But in a large number of cases, issuers are waiting for the EBA technical standards to come out anyway, which are not expected until later this year." Bankers hope that the EBA will allow for new Additional Tier 1 instruments to have a workable write-up/write-down structure, although this is not expected to come out until November. For issuers willing to follow the stricter rules already in place in the CRD IV draft, they could go earlier, although bankers said that the less investor-friendly terms could mean a higher price to pay for issuers. (Reporting by Helene Durand, Editing by Philip Wright) Link this Share this Digg this Email Reprints

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