EU strikes deal to improve bank capital buffers
Margrethe Vestager - Photo EU Council
(BRUSSELS) - EU finance ministers ended a year-long battle Tuesday over how to implement new international rules governing the capital banks need in reserve to protect taxpayers from providing more bailouts.
Danish Finance Minister Margrethe Vestager, who chaired the talks, said the deal would deliver "a sounder and more robust banking system in Europe" which would be "a key safeguard for growth and employment in the EU."
Regulators drew up tougher Basel III capital rules in a bid to prevent a repeat of the 2008-2009 financial crisis when governments were forced to bail out banks.
But the EU has been divided over how far to go beyond the minimum requirements.
Home to 80 percent of the EU's financial services industry, Britain wanted higher capital buffers than the 7.0-percent minimum set out under the Basel rules that EU partners saw as sufficient. They are currently set at just 2.0 percent of bank holdings.
The row centred largely on who would adjudicate disputes -- important because of the cross-border nature of the banking industry and the financial value of a European industry anchored in the City of London.
A compromise within the EU that secured holdout British acceptance lets national regulators demand another 3.0 percent worth of capital safeguards without requiring approval from Brussels.
"Weak bank capitalisation, weak and poorly harmonised liquidity rules, and fragmented and uncoordinated supervision were all contributing factors to the financial crisis," said EU markets commissioner Michel Barnier.
He said he was happy with the outcome of a 600-page agreement that will apply to 8,300 banks.
The deal "will help protect the taxpayer from picking up the bill when things go wrong," said a spokesman for the UK Treasury.
On Monday, the European Parliament -- which has to pass final legislation -- said it was ready to move forward and a reading by MEPs is programmed for next month.
3167th ECONOMIC and FINANCIAL AFFAIRS Council meeting (provisional version) - Brussels, 15 May 2012
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