EU Banks: Italy, France, and Germany Call for Changes to Basel 3+
The Treasuries of the EU’s 3 largest economies sent a letter to the EU commission, we took a look at what it says, and how it might affect Europe’s largest banks.
The 3 treasuries sent a 3-page letter to the EU commission to ask for a delay of the introduction of Basel 3+ rules. The new requirements for banks are set to be enforced as of January 1, 2025. The argues that European banks will lose competitiveness on a global scale, especially if the U.S. decides not to adhere to the rules.
“The more competitive our banking systems, including national champions, the better equipped they will be to finance key European goals,” Stated the signees of the letter. In the letter, the regulators express their concern that the U.S. may abandon the Basel 3+ altogether.
Stating that they expect the U.S. to diverge from the rules, this may stem from the possibility that a Trump victory in the upcoming election could put an end the country’s participation. Even without a Trump victory, the U.S. banking industry has been able to lobby for a delay in the implementation capital requirements for banks.
The main focus of the letter are the concerns of competitiveness, where new capital requirement rules are mentioned as being too stringent. “It’s important to put more emphasis on the competitiveness of the financial sector, especially banking, and its ability to finance the economy.”
The letter also requests a review of the green asset ratio, which need to be more realistic. The letter states the need for the EU to reestablish a competitive capacity at a global level. Indicating that the more competitive the banking industry is, the better equipped the EU will be to reach its goals.
Push for Greater Economic Competitiveness
The letter comes among calls from the three countries that signed the letter for a more competitive EU. Ex-ECB president Draghi mentioned recently the need for European bank to be more competitive for the EU to compete economically at a global level.
In comparison to their USA peers, EU banks have lower returns and smaller asset sizes. JP Morgan alone has a higher capitalization than the top 10 EU banks put together. Recently French president Macron has stated that the EU “could die” if it fails to remain competitive and should adopt a more protectionist agenda.
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