Saturday 20 January 2018

EU ministers bid to reach deal on bank capital levels

Finance Minister Michael Noonan. Photo: Getty Images
Finance Minister Michael Noonan. Photo: Getty Images

Sarah Collins in Brussels

EU finance ministers were last night battling to reach a deal on boosting bank capital levels without the help of Finance Minister Michael Noonan who left the talks early.

He flew out of Brussels despite telling his EU colleagues that the issue was "of vital concern to Europe" and should not be put "on the long finger".

The all-day talks centred on whether to allow national regulators the freedom to ask banks to hold extra loss-absorbing capital without having to run it past the Commission.

The argument overturns traditional alliances, pitting the UK and Sweden, who say the flexibility to impose tougher rules will prevent taxpayer-funded bailouts, against France and Germany, who insist on EU-regulated maximum capital levels and less stringent limits on leverage.

The banking industry has lined up behind the Franco-German approach while the European Central Bank is, unusually, siding with Britain, calling for "constrained discretion" for regulators.

Common rules

Mr Noonan yesterday appealed for a set of common rules and threw his weight behind a Danish compromise text giving regulators the power to impose an extra 3pc cash buffer on banks that pose systemic risks, as long as it is coordinated with other countries.

"The principle has to be that we're establishing a common European set of rules that are clear, that are clearly understood both internally and externally, and that we're not moving towards a position where flexibility will give us 27 sets of rules rather than one common set of rules," he said.

Ministers were discussing changes to last summer's European Commission proposal, which set a minimum capital requirement of 10.5pc, a level the Department of Finance said has already been met by Irish lenders.

MEPs have to approve a final deal and have already made over 3,000 amendments of their own, including much tougher restrictions on bank bonuses.

The rules will be phased in from next year and will cost the EU's 8,300 banks at least €460bn, the commission estimated.

It said the extra capital will help avoid a repeat of the current crisis, which has seen governments pump €3.6 trillion in cash and guarantees into ailing lenders.

Banks have argued that they will have to cut back on lending to meet the new requirements, further stalling growth in the midst of a double-dip recession that has worsened as governments cut back on key spending to meet EU debt and deficit limits.

New figures released yesterday showed the eurozone's jobless rate reached a record high of 10.9pc in March, prompting EU employment chief Laszlo Andor to say that the EU was stuck in an "austerity trap" partly caused by "the predominant focus in the last two years on fiscal consolidation and internal devaluation".

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