Are European Banks Progressing Toward New Standards?
Many European banks are still far from complying with new global banking regulations, Reuters reports. A new set of international banking regulations, known as Basel III, are set to kick into full gear in 2019. However, many leaders and statesmen have called on banks to conform to the new standards on a much earlier time span, hoping both to ease the transition to the new rules and to take steps to protect against another financial crisis sooner rather than later.
The most pressing changes embodied in the Basel III protocols can be split into three main categories. The first alteration is that banks must now maintain a core capital buffer equal to 7 percent of their assets, accounting for risk. For most banks, this represents a tripling of the amount of capital that they must have on hand. In the European Union, banks are still slightly over 70 billion euros away from accomplishing this goal. According to a report issued by the European Banking Authority, progress was made in the last six months of 2012 with the capital deficit shrinking by over 29 billion euros during the time period.
The second broad category of changes concerns the liquidity ratio of banks, whereby they are going to be required to maintain separate buffers for both cash and government debt. While most of the top European banks had already accomplished this objective, many of the smaller banks in the region lagged behind, with 225 million euros the estimated sum of the shortfall of the smaller banks included in the survey.