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PRUDENTIAL BANKING RULES : BASEL III: EUROPEAN UNION AMONG THE LAGGARDS.

More than half the countries that are members of the Basel Committee on Banking Supervision have fallen behind on implementing the Basel III regulatory framework, the new international prudential banking rules that should have been in force from 1 January 2013. These include nine EU states (UK, France, Sweden, Spain, Netherlands, Luxembourg, Germany, France and Belgium) that sit in the Basel Committee, as well as the United States.

Only 11 of the 27 countries have met the deadline, notes the committee in its progress report on implementation of Basel II, Basel 2.5 and Basel III, published on 4 April(1).

The Basel Committee, set up in 1974, is an international organisation with 27 member countries that include Germany, Belgium, Canada, the United States, France, Italy, Japan, the Netherlands, the United Kingdom, Argentina, Japan, China, South Korea and Singapore.

In 2010, its members adopted the Basel III rules to strengthen the banking sector's resilience. These rules create new capital and liquidity requirements for banks. The committee made provision for phased-in implementation of the rules from January 2013 to 2019.

Its progress report sums up the state of implementation of these rules at the end of March 2013 by its 27 members and by the European Union, which has also committed to implement them. Only 11 states have completed the process of adopting the rules, thus meeting the deadline. They include Switzerland, South Africa, Singapore, China, Japan and Australia.

EUROPE'S DELAY

The European Union, more specifically the nine EU states that sit in the Basel Committee, as well as the United States, are among those that have failed to meet the deadline.

These nine states and, more broadly, all EU member states, are subject to the CRD IV-CRR reform, which adapts Basel III at European level but has not yet entered into force. After ten months of negotiations, the European Parliament and Council came to agreement on the reform in March (see Europolitics 4597 and 4612). MEPs are set to vote on the compromise at their April plenary session, after which the Council will formally endorse it. The reform will apply from 1 January 2014, one year after the start of the phased-in implementation process foreseen by the Basel Committee. However, if the reform text is published in the EU Official Journal (OJ) after 30 June 2013, the date will be pushed back to 1 July 2014 to give the 27 enough time to put the new measures into place.

As for the United States, the Basel Committee notes that US regulators intend to finalise adoption of these rules once they have reviewed all comments from stakeholders, obviously including the banking industry.

Many observers consider it essential for the rules to be applied by the Americans and Europeans at the same time, since 80% of financial transactions are between Europe and the US.

'We are pleased to see more countries implementing Basel III. We support the peer review process that should ensure a global level playing field,' said Robert Priester from the European Banking Federation (EBF) to Europolitics. 'Meanwhile, we remain concerned about the absence of implementation of Basel 2.5 and Basel III in one of the world's largest economies,' added Priester.

According to the committee's report, the United States is not yet fully applying Basel II or Basel 2.5 rules (with implementation deadlines of end 2006 and end 2011 respectively), which preceded Basel III. These are being fully implemented by the European Union, on the other hand.

(1) 'Progress report on implementation of the Basel regulatory framework' from the Basel Committee on banking supervision available at www.europolitics.info > Search = 333258
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Publication:European Report
Date:Apr 8, 2013
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