EU reportedly plans to ‘neutralise’ impact of Basel rule
The European Union has already delayed its implementation as it tries to maintain the competitiveness of its lenders in the face of delays in other financial centres
The European Union plans to “neutralise” the impact on lenders’ capital requirements from a new global banking reform affecting their trading operations, according to an EU official close to the matter on Wednesday.
The European Union is set to adopt the Fundamental Review of the Trading Book, a key part of the Basel III package devised in the wake of the global financial crisis, from January next year. The European Union has already delayed its implementation as it tries to maintain the competitiveness of its lenders in the face of delays in other financial centres. The rules are in place in countries across the common economic area.
The Fundamental Review of the Trading Book governs capital and reporting requirements relating to banks’ trading assets, crucially including how risk should be measured using a standard method or banks’ own calculations. It seeks to match banks’ capital requirements more closely with the real risks in their trading activity.
European banks have urged the European Union to refrain from imposing new burdens that their competitors elsewhere in the world do not face.
The EU is to introduce a “temporary multiplier” that neutralises the capital impact on banks that might be affected negatively by the FRTB rules, according to the source.
The plan formed part of a consultation launched last year, in which the European Commission (EC) sought feedback and said the design of a multiplier should be straightforward, sensitive to risk, and easy to implement, maintain, and supervise.
The Bank of England (BoE) has delayed the implementation of FRTB until 2028.