EU FINANCE ministers are struggling to overcome divisions over new capital requirements for more than 8,000 European banks, raising questions over their ability to strike a deal before a crucial deadline this summer.
At day-long talks in Brussels yesterday, ministers were unable to reach consensus on the rules governing how much capital they should set aside to cover future losses.
The initiative is designed to prevent a repeat of the 2008 banking crisis, which led governments in Europe and the United States to prop up dozens of stricken institutions and recapitalise them with taxpayers’ money.
On the table yesterday was a compromise proposal from Denmark’s rotating presidency of the EU, which aims to strike a deal with MEPs before its presidency ends next month.
The plan was initiated by EU internal markets commissioner Michel Barnier with the objective of transposing new standards set by the Basel committee of international regulators into European law by next year.
Britain, Spain and Sweden have pushed against measures that would stop national regulators toughening the safeguards against a banking collapse. France and its allies, Italy and Austria, are pushing for the application of pan-European capital standards.
The issue is highly sensitive given the danger that deposits could flow into banks with stronger capital from weaker rivals in a time of crisis.
Denmark proposed giving national regulators the ability to impose tough capital surcharges over the Basel standard in respect of risky assets. However, divisions surfaced over whether the European Commission should have the power to impose new capital limits above the Basel thresholds.
Although Minister for Finance Michael Noonan backed the Danish proposal, the new rules are still likely to be less stringent than those applying to Irish banks under the EU/IMF bailout. In an effort to regain the confidence of inter-bank lending markets, Ireland’s banks have been capitalised to a higher degree than is usual under existing European rules.
Mr Noonan left the meeting in mid-afternoon. The talks were still ongoing after teatime, with officials suggesting hopes for a deal were fading.
As he arrived yesterday morning, German minister Wolfgang Schäuble said he did not believe an agreement was in prospect. “I don’t think we will come to a conclusion today,” Mr Schäuble told reporters. Banks with too little capital carried greater risks, he said. Banks would need more capital to stabilise the financial system.
