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Basel rules: Apply proportionate approach

Basel rules: Apply proportionate approach
​​Adapt them to EU-specific banking landscape

​BRUSSELS, 26 March 2019

The following is an excerpt from the recently released brochure 'Together for a growing and more integrated europe: Savings and retail banks’ drive to help Europeans prosper​'.

The Basel agreements provide a perfect example of rules designed in the first place for large, international banks. Both smaller European banks, which use standardised approaches to measure risk, and larger European banks that use internal models, would be severely affected by the reform. If the final rules of the Basel III agreement are to be applied to every single bank in Europe, they are quite likely to increase banks’ cost of capital, in particular low-risk banks. The additional costs and lost risk sensitivity for banks are likely to be passed on to the wider economy through higher prices for low-risk credit and reduced lending. This effect will not be uniform across classes of borrowers. Analysis from various sources indicate that mid-size companies without an external rating or which are not listed on a stock exchange, but that do not qualify for the definition of small and medium-sized enterprises (SMEs), are likely to be hit especially hard. The reform is also expected to have a significant impact on mortgage lending.

Against this background, and regarding the adaption of the international Basel standards in European law, it is essential that the law reflects national and European particularities. Most importantly, its implementation within the EU regulatory framework should reflect the proportionality principle taking into consideration the nature, scale and complexity of the activities of European credit institutions. When implementing the latest Basel rules, Europe should develop an approach that duly takes into consideration the European specificities.

To learn more about the latest public policy positions on banking from ESBG, see the brochure 

Together for a growing and more integrated europe: Savings and retail banks’ drive to help Europeans prosper

Basel III; Proportionality; European Institutions; European Supervisory Authorities (EBA-ESMA); Diversity