EU set to partly delay key banking reform, as US drags feet

Just days after European elections, EU officials are planning to shave some of the banking-sector protections designed to prevent a return of the 2008 financial crisis, a source briefed on the issue told Euronews.  

In 2017, an international standard-setters organisation issued a reform designed to hike the capital European banks need to issue against risk.  

The worry was that many lenders were undercounting risk by using their own, tailored internal models – leaving them dangerously exposed, and risking a further wave of taxpayer bailouts, should the economy turn sour. 

After much haggling, Brussels finally agreed on complex rules to put that global deal into effect.  

EU member states finally signed it off just two weeks ago, on 30 May.  

Now Brussels officials are concerned that other parts of the world won’t carry out their side of the bargain, since US regulators won’t implement controversial measures in an election year. 

Later this month, the EU executive will propose to delay some aspects of its recent overhaul, the source told Euronews.  

The move would delay provisions designed to protect banks’ trading books against the market risk of volatility across the financial system, and as such concerns “just a small aspect” of the recently agreed law, the source said, speaking on condition of anonymity.  

Provisions previously due to take effect in January 2025, would be delayed by a further year, under the secondary Commission legislation which then needs to be approved by MEPs and member states.  

But, with the UK also threatening to dawdle, the EU doesn’t want to be the only jurisdiction to move, and potentially stymie its own banks’ competitiveness. 

“Given the uncertainty around the implementation of the standards in other jurisdictions, the Commission monitors the international developments and stands ready to act if necessary in specific areas,” a Commission spokesperson told Euronews.  

A delay would certainly prove popular with the European industry – who complain that constantly hiking reserves restricts their ability to lend to the economy. 

Without alignment, “European banks cannot offer clients the same conditions as US counterparts,” Gonzalo Gasos, Senior Director of Prudential Policy & Supervision at lobby group the European Banking Federation, told Euronews in a written statement. That could create a “major competitive issue” as of the first day of any discrepancy, Gasos added.  

The move comes just after EU elections returned a more right-leaning, eurosceptic parliament.  

The Commission, whose senior officials are set for a reshuffle in November, may now find itself under pressure to cut the red tape that’s perceived as holding back competitiveness.  

There’s already a debate over whether Brussels will roll back its landmark climate rules, such as a ban on the sale of new petrol and diesel cars. 

But there could also be a wider move to unpick other areas of post-crisis financial rules, including for securitisations, the structured packages of loans deemed to be responsible for the financial crisis.  

In 2008, after the US housing market crash, the widespread resale of securitisations meant many lenders were left with toxic or worthless assets on their books.  

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But Brussels may now be looking to relax some of the extra capital rules it introduced in response – protections previously defended by left-leaning lawmakers.  

That plan has been championed by the European Central Bank, and by EU member states, who put relaunching securitisation at the top of a wishlist of measures to boost capital markets.  

That’s borne fruit, and EU financial services commissioner Mairead McGuinness has promised a consultation on how to revise the market for the autumn.