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Press release  

 

The Basel proposals must be amended in order to enable continued financing of the economy

French banks are in favour of reforms to regulations in order to promote a more resilient international banking and financial system. However, they are concerned about the proposals from the Basel Committee presented last December which, if adopted as it is, would have an extremely negative impact on growth in both France and Europe. They would ultimately lead to inappropriate and excessive global minimum capital and liquidity requirements, which would curb banks' abilities to lend to companies, particularly SMEs and households. Based on an initial estimation, the strict application of the current Basel proposals would lead to a 1.5% drop in euro area GDP in the short term and 6% after a few years*.

This is why in its response to the Basel Committee's consultation, the FBF is requesting that the proposals be amended in order that the reforms take into account the priority of "a robust return to growth and job creation" expressed by certain Heads of State and Governments of the G20.

New impact studies before Basel makes its final recommendations

The FBF is requesting that a new impact study be carried out in order to measure the appropriate scale and consequences of the new measures that will be adopted following analysis of the different responses to the consultation. It is essential to take into account the necessary time to accurately assess the impact of a reform which will structure the global banking industry for a number of years and, consequently, the financing of the economy.

The new regulations must be applied to all players everywhere

Like European banks, the FBF is reminding the Committee that future prudential regulations must be coordinated at an international level and apply to all players, whether regulated or not, in order to ensure maximum efficiency and avoid any competitive distortion. Currently, US banks still do not apply the Basel II regulations which have been in force in France and Europe since January 2008.

Lastly, French banks are insisting that new solvency and liquidity measures should only be implemented once the economic recovery is fully underway, which was also the wish of the G20 summit in Pittsburgh.



*Moreover, the consequences will be greater in Europe than in the United States where companies finance on the markets to a greater extent.

The main points of the FBF’s response

- The FBF is in favour of a harmonised definition of capital and a target increase of capital requirements for activities which were revealed to be undercapitalised during the 2008 crisis, such as certain market activities, particularly securitisation.


- The leverage ratio is a poorly adapted tool because it does not take into account risks and is highly dependent on accounting conventions. It should therefore simply be an additional supervision indicator for the national regulator and, as such, appear in Pillar 2.


- The FBF is in favour of building up counter-cyclical capital buffers based on expected losses, which is less pro-cyclical than the current incurred loss provisioning model, provided that they are of an accounting nature, calculated taking into account a complete economic cycle and are detailed on the income statement. However, the FBF is not in favour of building up variable capital buffers in order to combat excessive lending growth, nor is it in favour of capital retention measures which would unnecessarily freeze capital.


- The FBF approves the implementation of internationally harmonised liquidity ratios but believes that the two compulsory regulatory ratios proposed are poorly adapted because the assumptions currently used are excessive and would prevent the banks from playing their intermediation and transformation role. The FBF would also like the advanced methods, such as those implemented in France on the initiative of l'Autorité de contrôle prudentiel, to be recognised internationally in addition to the standard method proposed.

CONTACT

Colette Cova
email : ccova@fbf.fr
Tel : 01 48 00 50 07

Kenza Benqeddi
email : kbenqeddi@fbf.fr
Tel : 01 48 00 50 08

 
 
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