FSB Says Higher Bank Capital Requirements Will Remain

Europe’s Financial Stability Board (FSB) said on Friday (June 7) that higher bank capital requirements, which were put on the books during the financial crisis, will remain.

Reuters, citing the regulator, reported it found the negative impact on small business lending was short in nature, and that there is no need to change the rule. When the banks were required to increase their capital in 2010, they argued it would hurt their ability to keep up their lending pace. The assessment by the FSB, which is being presented to a meeting of G20 ministers and central bankers this weekend, found that lending did not regain pre-financial crisis levels in all jurisdictions.

Laas Knot, the FSB vice chair, said the set of requirements – called Basel III – had a temporary impact on bank lending, with the decline seen primarily at less capitalized lenders. “Based on this evaluation at the level of the FSB, I do not anticipate any review, revisiting of the current rules,” Knot said.

In January, the U.K. government reportedly rejected recommendations by the Treasury Select Committee that suggested stricter regulations on bank lending to small businesses (SMBs).

The small business lending market has been booming thanks to the entrance of FinTechs. Last month, PayPal announced that it has provided more than £1 billion in financing to small businesses in the U.K. through its Working Capital program. The company said in a statement that the total amount of funding advanced to firms was up 60 percent, reaching that £1 billion tally in 2018. More than 37,000 businesses are said to have tapped into its working capital offerings, which debuted five years ago. The firm also noted that its growth in small business lending came against a backdrop where traditional bank lending to smaller companies was flat in that same period.