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EU to launch new impact study on Basel bank capital rules

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By Huw Jones

LONDON (Reuters) – The European Union will sound out banks for a second time before implementing the final phase of global capital standards aimed at averting taxpayer bailouts in a crisis.

The bloc’s banking watchdog, the European Banking Authority (EBA), dismayed lenders over the summer by saying the last section of global standards, known as Basel III, should be implemented in full by the EU.

Written by banking regulators from across the world, Basel III aims to avoid a repeat of the taxpayer rescues of banks in the 2007-09 global financial crisis.

Most of the accord is in force, but final elements were agreed in December 2017, marking additions so extensive that bankers dubbed it Basel IV.

“The Commission will carry out a thorough impact assessment of the proposed changes as well as a public consultation to gather views of the various stakeholders,” a European Commission spokesman said.

Opting for another study will raise hopes among bankers of a dilution in the rules after Bank of France Governor Francois Villeroy de Galhau said in May it was necessary to ensure fair implementation of a new capital “floor”.

The EBA has said full compliance by a 2027 deadline would mean banks facing a collective capital shortfall of 135 billion euros.

The European Banking Federation, an industry lobby, warned at the time that banks would come under market pressure to exceed minimum requirements, which could jeopardise dividends to investors.

Some EU banks are still recovering from the financial crisis as they whittle away piles of poorly performing loans.

Recommendations from the EBA are often followed by the European Commission, but the EU executive signalled on Monday that this time they were a starting point.

“Together with the feedback from the exploratory consultation and the public consultation forthcoming later this year, the EBA’s advice provides an important input for the Commission’s own impact assessment and policy options,” the Commission spokesman said.

The executive added that it remained committed to international regulatory cooperation.

“In order to maintain a level playing field for banks at global level, it is essential that all major jurisdictions implement all the key elements of the Basel agreement,” it said.

France had led opposition to full application of Basel, arguing among other things that capital demands were set too high and there was uncertainty over how the United States would apply the standards.

France’s banking lobby, headed by SocGen chief executive Frederic Oudea, has said European banks could lose competitiveness to American rivals.

“There is a framework agreement that was signed, but before transposing it, could we give ourselves time and look at its actual consequences?” Oudea told French business daily Les Echos last week.

(Additional reporting by Maya Nikolaeva in Paris; Editing by Dale Hudson)

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