(Reuters) – Banks in the European Union will collectively need a further 1.2 billion euros ($1.18 billion) to meet a set of global capital rules in full by 2028, the bloc’s banking watchdog said this week.
In the latest sign of how well capitalised lenders in the bloc have become in broad terms, the European Banking Authority said on Friday that implementing the Basel III global accord in full would result in an average increase of 15% in current core ‘Tier 1’ capital buffers, with much of the shortfall among smaller, domestic-focused lenders.
Banks have faced far tougher capital requirements since taxpayers bailed out many of them during the global financial crisis more than a decade ago.
The requirements under Basel III have largely been rolled out, but some remaining elements are due to be fully implemented by 2028 in the EU, Britain, the United States and other jurisdictions.
The EU plans to delay by two years until January 2025 when banks should start to implement the remaining Basel III rules.
The bloc’s member states and European Parliament are also negotiating whether to introduce temporary or permanent waivers from some rules as banks say that applying them in full and on time would bump up capital requirements significantly.
EBA said that if proposed EU ‘adjustments’ to Basel were factored in, the shortfall would fall to 400 million euros, but if planned additional EU buffers were added, the shortfall rises to 1.4 billion euros.
Ana Botin, president of the European Banking Federation and chair of Banco Santander, told an EBF conference on Thursday that reliance on banks will increase as EU states and companies borrow more to revive growth and transition to net zero.
“In recent years, European banks have built up more capital than our U.S. counterparts, more than 250 billion euros since 2014 in a period when CET1 ratios remained stable in the U.S,” Botin said.
At the same time, Europe must continue to push for a regulatory framework that can deliver a competitive, profitable and strong banking sector to serve the economy, the EBF said.
($1 = 1.0160 euros)
(Reporting by Huw Jones; Editing by Alexander Smith)