>> See ESBG overall position on Basel reform
BRUSSELS, 14 December 2016
The so-called output floor, a main element awaiting decision
in negotiations on finalising Basel III, is downright dangerous for European banks. It’s
too much medicine for the cure and would hurt
some regional economies and some banks’ business models.
Costs would rise for loans originating from banks that use
internal models. That would likely hamper the number of loans granted to both households
and businesses of all shapes and sizes. It would be an untimely blow to a European
economy largely bank-funded and where a great many banks use internal models.
Final compromises by the Group of Governors and Heads of
Supervision on 8 January around proposed regulatory reforms – possibly
including an output floor – should bring the Basel reform process to an end.
Before then, we continue to stress that imposing a standardised floor for all
credit institutions, regardless of their business model, would be unwise. Any
floor above 60%, which is one of the figures currently circulating, would
increase capital requirements of European banks significantly.
economy and providing liquidity to the markets in Europe is best led by banks. Their
lead role is irreplaceable.
borders, Basel decisions deemed unbalanced would disrupt an already fragile
global level playing field.
Apart from that,
loan splitting should be allowed in the revised standardised approach
for credit risk. Internal models for specialised lending should be kept too, as
they represent massive money flow and relate to key infrastructure and
commodities that could not easily be financed otherwise.