Mark Hoban, financial secretary to the Treasury, has warned the European Commission not to impose any rules which will undermine the ability of UK regulators to go beyond the capital requirements set out in Basel III.
The latest Basel accord originated in an agreement by the G20 and would set a minimum core tier one capital requirement for banks of 7% from 2019.
The rules will be applied in Europe through the Capital Requirements Directive 4, currently being worked on by the European Commission. The UK government has raised concerns that CRD4 will impose “maximum harmonisation”. It says this will mean the Financial Policy Committee will not be able to go further than the rules in the directive and so will not be able to apply the higher capital requirements set out by the Independent Commission on Banking.
In a speech in Brussels this afternoon, Hoban said being able to place higher requirements on banks is vital to reduce the need for recourse to public money if they fail.
He said: “Jurisdictions must retain the right to apply higher levels of regulation to ensure financial stability in their own markets. This is particularly important for countries like the UK that are home to large global financial centres.”
He added that his position is backed by the International Monetary Fund, the European Central Bank and the European Systemic Risk Board. “It is an argument we all supported at the G20,” he said. (article continues below)
British concern over the rules continues despite the fact that last September the European Banking Authority chairman Andrea Enria said they would not stop the ICB’s 10% requirement being applied.
He also called on other national and European regulators to develop macro-prudential tools like those the FPC will use so they can address emerging risks effectively.
He warned against “erecting barriers” which would restrict access by countries outside the EU to European markets. He said Mifid’s strict equivalence rules which require countries to have rules to the same standard put forward in the directive before they get access to European markets would “close the EU market entirely to any new third country firm”.
He added: “At a time when we have to do everything we can to attract investment to support the economic recovery we cannot cut ourselves off from the rest of the world.”