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EU Calls for Sweeping Changes to Basel Bank-Capital Proposal 

September 29, 2016

Silla Brush, Bloomberg

Global banking regulators need to make sweeping changes to proposed new rules to protect European Union lenders against a spike in capital requirements, said Valdis Dombrovskis, the bloc’s financial-services chief.

The Basel Committee on Banking Supervision should rework planned restrictions on how banks use internal models to estimate risks from real-estate loans as well as corporate and infrastructure lending, Dombrovskis, a vice president of the European Commission, said in Brussels on Thursday. Banks have warned that the proposals on how they assess credit, operational and market risk would lead to hundreds of billions of dollars in additional capital charges.

The planned introduction of capital floors, which cap the benefit banks gain by using their own models compared with a formula set by regulators, should be scrapped, Dombrovskis said. The position of the commission, the EU’s executive arm, puts it at odds with the U.S., which has said regulators should consider discarding the internal-model approach altogether because it creates the potential for banks to game the rules.

“A solution we could not support is one which would weigh unduly on the financing of the broader economy in Europe,” Dombrovskis said, according to the text of a speech distributed by his office. Read more 

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