Brussels: Europe and the Arabs
The European Union is on the verge of enhancing the resilience of banks operating in the Union and strengthening their supervision and risk management by completing the implementation of the globally agreed regulatory reforms of the Basel III agreement. Today, negotiators from the Presidency of the European Council representing member states on the one hand and the European Parliament on the other, have come to a conclusion Interim agreement on amendments to the Capital Requirements Regulation and the Capital Requirements Directive.
“After extensive negotiations, we have reached agreement on updated rules which we believe will enhance the strength and resilience of banks operating in the Union. This is a major step forward that will help ensure that European banks can continue to operate also in light of external shocks, crises or disasters. Implementation is promising. The rapid implementation of global standards is also an important signal to our international partners and the EU's continued commitment to international cooperation and multilateralism." According to a European statement issued in Brussels on Tuesday by Elisabeth Svantesson, the Swedish Finance Minister whose country holds the current rotating presidency of the Union, according to what was stated in the statement, "Today's agreement represents the culmination of a long process to reform the banking rules of the European Union in the wake of the financial crisis.
And by making the banking sector more resilient, the new rules will help the EU continue to face challenges such as COVID-19 and the economic impact of the war in Ukraine. The rules will also support green and digital transformations with a strong banking sector that can provide financing for the real economy, households and citizens.” According to Niklas Wakeman, Swedish Minister for Financial Markets
Under the interim agreement, negotiators agreed on how to implement a so-called "production floor", reduce banks' volatility in capital levels calculated using internal models, and appropriate transitional arrangements to allow enough time for market players to adjust.
The negotiators also agreed to make improvements in the areas of credit risk, market risk and operational risk. They also agreed to provide for additional proportionality in the rules, particularly for small and uncomplicated enterprises.
The agreement also includes a harmonized "adequate and appropriate" framework for assessing the suitability of members of the governing bodies of institutions and key job holders. Similarly, agreement has also been reached on the rules for protecting supervisory independence, in particular by providing a minimum cooling-off period for employees and members of the governance bodies of the competent authorities before they can assume positions in the institutions under supervision, and setting the exact time. in positions of members of governance bodies.
Negotiators also agreed on a transitional prudential regime for crypto assets and on amendments to strengthen banks' management of environmental and social governance (ESG) risks.
Under the interim agreement, negotiators decided to harmonize minimum requirements applicable to third country bank branches and to supervise their activities in the EU.
The agreement was approved "on condition of consultation" and is therefore provisional as it still needs to be confirmed by the House and Parliament before it can be formally adopted.
The European Union is about to complete the implementation of the international Basel III agreements in European Union law. The Basel III agreement was reached by the European Union and its G20 partners in the Basel Committee on Banking Supervision to make banks more resilient to potential economic shocks. Basel III standards include a number of measures to enhance the prudential regulatory standards, supervision and risk management of banks in response to the global financial crisis of 2007/2008.
The European Commission submitted its proposals for the revision of the Capital Requirements Regulation and the Capital Requirements Directive on October 27, 2021. In addition to amendments to implement Basel III standards, the proposals also included several measures related to the supervisory framework. The Council approved its general approach to the proposals on 8 November 2022. The tripartite with the European Parliament began on 9 March 2023 and ended with the provisional agreement reached today.