We fight watering-down of new banking regulations
Posted, May 14, 2012 @ 19:00
The European Parliament's Economic and Monetary Affairs Committee today voted on legislation to implement the so-called Basel III agreement on banking reform drawn up in the wake of the Lehman Brothers crash in 2009.
The new Capital Requirements Regulation Directive sets out minimum levels of capital and liquidity which a bank must hold.
Conservative negotiator on the legislation Vicky Ford MEP has consistently opposed efforts to water down the international G20 agreements which the EU entered into.
Amendments which she submitted beef up the quality of capital, improve transparency and allow national governments the opportunity to go further (for example, with the Vickers reforms in the UK which would ring-fence retail arms from investment banking).
In a key vote, Mrs Ford and fellow Conservative MEPs won the right for national governments to adopt stricter controls than the EU minimums.
Her amendments will also let banks free up capacity for lending to small businesses, for trading finance and for infrastructure funding.
A part of the proposal which could have forced UK banks to take early repossession of homes where mortgage holders have run into arrears was changed thanks to a Ford amendment.
The committee passed key amendments to protect industrial companies which would otherwise face a steep rise in the cost of hedging true business activities and cause them severe competitive disadvantage in managing interest-rate and exchange-rate risks.
The new proposals also deal with corporate responsibility and bankers' bonuses. Mrs Ford wants further tightening of bonuses but believes that a 1:1 maximum ratio for bonuses (i.e. a maximum bonus of one year's salary) could push up general pay for bankers - making it harder for a bank to reduce its most substantial overhead in a downturn. Therefore she has said that paying above this cap could be allowed but only following an annual shareholder vote on the level.
Mrs Ford said: "This is crucial package of reforms for banking. We have fought all along to make sure it delivers a robust and reliable system that works across Europe but also allows Britain flexibility. If London and Edinburgh wish to set even more-exacting standards than Paris or Frankfurt do, if that is what investors seek, then they should be allowed to.
"Not all my suggestions were followed, and the package is weaker than the Basel agreement in some areas. Typically, a number of amendments were passed which allow some French banks to follow different rules from the rest of us, something I would not be comfortable with in their position.
"However, in balance I believe we have come out with proposals that work for Europe and the UK."
The proposed legislation will now go to a meeting of EU finance ministers tomorrow (Tuesday).