European policymakers are pushing back the implementation of a key part of the revised capital rules for banks, citing delays by U.S. regulators and Europe’s desire for a level playing field.
At a joint conference of the European Commission and the European Central Bank (ECB) in Frankfurt Tuesday, commissioner Mairead McGuinness said policymakers have decided to delay the adoption of the provisions dealing specifically with market risk in banks’ trading books in the post-financial crisis reforms, known as Basel III, until 2026.
While she said the rest of the Basel III reforms are on track to take effect Jan. 1, 2025 in Europe, policymakers are concerned about other markets — particularly the U.S. — adopting the rules too.
“As with any international agreement, it’s essential that all parties implement faithfully. And this is important for the credibility of international standard-setting bodies,” she said.
With U.S. regulators expected to delay the implementation of the Basel III reforms, likely until the start of 2026, McGuinness said Europe will be doing the same for the section that captures market risk.
“Rules on market risk are very important for investment banks, and there is strong competition between European, internationally active banks and other global banks,” she said.
While there’s still legislative work to be done to adopt the delay, McGuinness said the commission is announcing its plans to provide clarity to banks in the meantime.
“I would also add that we sincerely hope that the U.S. will apply the Basel III standards at the earliest opportunity,” she said.
For the rest of the Basel III rules, Europe will be sticking to its original deadline, “But on market risk, we do need to ensure a global level playing field and alignment on the entry into application of the rules,” McGuiness added.