PARIS (Reuters) – The European Union (EU) “could and should” delay the implementation of certain rules governing bank capital if the United States delays too long in transposing the Basel 3 reform, the EU said on Wednesday. Governor of the Bank of France, François Villeroy de Galhau.
The Basel Rules, established by the Basel Committee on Banking Supervision, aim to regulate the international banking sector by setting minimum capital requirements. These rules were significantly tightened after the 2008 financial crisis, drastically increasing banks’ capital requirements.
However, the Basel rules are not binding. The United States has thus only partially transposed the latest so-called Basel 3 reform, unlike the European Union.
“Clearly, this transposition of Basel 3 is necessary in the United States: this standard currently only applies to 13 banks there, leaving a multitude of sometimes important banks subject to rules that are too loose,” declared Wednesday François Villeroy de Galhau during a speech on the occasion of the presentation of the activity report of the Prudential Control and Resolution Authority (ACPR) for 2023.
The American authorities are committed to a “full and faithful transposition” of the agreement, he recalled. “Nevertheless, uncertainty remains over the timetable as well as over the exact substance of the final text.”
“If unfortunately too significant delays and/or a discrepancy in content were to be noted, then Europe could and should – as provided for in the ‘banking package’ approved on December 6 – postpone the entry into force of certain provisions, particularly those on market risks”, said François Villeroy de Galhau during a speech on the occasion of the presentation of the activity report of the Prudential Control and Resolution Authority (ACPR) for 2023.
“It’s clearly not our first best, but it’s a safeguard,” he added.
At the end of April, French President Emmanuel Macron deemed it necessary to “revise” the application in Europe of the Basel regulations, stressing that Europe could not be “the only economic area in the world which applies it”.
François Villeroy de Galhau also judged that it was “desirable, logical, normal” for cross-border bank mergers in Europe to be as easy as within the same country.
(Reporting by Leigh Thomas and Mathieu Rosemain, Blandine Hénault for the French version, editing by Kate Entringer)
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