Leaked EU Proposal Plans Regulatory Relief for Banks

The European Union is preparing to make it easier for banks to move funds between EU member states, the Financial Times reported Thursday (June 18), citing a leaked report from the European Commission that is set to be released in July.

This is one of several measures the EU plans to take to improve the competitiveness of the banking sector, whose performance has lagged that of banks in the United States, according to the report.

The EU also plans to give banks capital relief on mortgages and loans to unrated companies, reform the structure of bank deposit insurance frameworks, review capital requirements for investment firms, and consider stopping or reducing the application of Basel III international banking rules to smaller lenders, the report said.

The report outlines draft legislation that could be introduced next year, per the report.

Banks in the EU have long argued that the requirements imposed upon them by supervisors, resolution authorities and national regulators often overlap and reduce the banks’ lending capacity, according to the report.

They have sought reductions in capital requirements, but the changes outlined in the European Commission’s report fall short of what banks have sought, the report said.

Reuters also reported on the leaked publication, saying that banking regulators in not only the EU but around the world are looking at ways to reduce regulatory burdens on banks to support their growth.

These moves have been prompted in part by the need to respond to changes made by U.S. regulators, which have been more aggressive, according to the report.

Reuters reported Tuesday (June 16) that the European Banking Authority said that limited changes to how bank capital is structured could support the banking sector’s competitiveness and economic growth without weakening the sector’s resilience.

It was reported Tuesday that while Europe’s banking regulators released updates to their capital rules for lenders, the changes represent a rejection of calls by the banking industry for major changes to the EU’s capital requirements.

The report by the European Banking Authority was designed to clarify what many lenders argue are excessively complicated and duplicative capital requirements, per the report.