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EU Commission to propose bank capital reform by June - Dombrovskis

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By Reuters
EU Commission to propose bank capital reform by June - Dombrovskis
FILE PHOTO: European Commissioner Valdis Dombrovskis speaks as he attends his hearing before the European Parliament in Brussels, Belgium October 8, 2019. REUTERS/Francois Lenoir   -   Copyright  FRANCOIS LENOIR(Reuters)

BRUSSELS (Reuters) – The European Commission could propose new rules on bank capital in the European Union by June, to introduce a reform that was agreed globally nearly two years ago, the EU finance commissioner said on Tuesday.

Under the new rules agreed with the United States, and known as Basel III, an “output floor” would limit the extent to which a bank’s capital requirements, based on the lender’s own risk model, can diverge from how they would be calculated under a more conservative model set by regulators.

The aim is to increase banks’ ability to withstand financial shocks.

Valdis Dombrovskis said the EU executive was aiming at making a proposal “in the second quarter of 2020” to turn that reform into EU law.

He called on regulators from the U.S. and other major partners to adopt the key elements of the Basel reform.

He also said the EU will not apply the rules before the end of 2026, fully using the transitional period agreed with global partners.

Dombrovskis called on banks to provide input before the reform is put forward.

“Prudential rules could favour ‘green’ investments and loans, naturally while keeping prudential considerations in mind,” he said, adding that the reform will take into account “European specificities” to avoid increased capital requirements having a disproportionately negative impact on some specific sectors, business models or activities.

(Reporting by Francesco Guarascio; Editing by Simon Cameron-Moore)