▷ The horror scenario is canceled, comment on banking supervision by Bernd Neubacher


21.10.2021 – 20:30

Stock exchanges newspaper

Frankfurt (ots)

Armageddon will probably fail in the banking sector for the time being. This conclusion arises in view of the EU Commission’s assessment that the conclusion of the Basel III capital framework will increase the minimum capital requirements of banks on the continent by just 0.7 percent to 2.7 percent by 2025 and by 6 after the end of the transition period in 2030 That will climb 4 percent to 8.4 percent. Should it come to that, this would not only correspond to the requirement formulated years ago for the Basel Committee on Banking Supervision to avoid an increase of more than a tenth. It would also be a far cry from the horror scenarios that have been circulating in the market in recent years. Two years ago, the European Banking Authority (EBA) forecast an increase of 21 percent for large, international banks. The new figures say a lot about forecasts, but even more about the possibilities of structuring a set of rules in the small print that hardly anyone has seen through all of its ramifications for a long time.

One thing is clear: When it comes to the question of how the so-called output floor is implemented to restrict bank-internal models, Brussels is taking a hard line – despite brisk efforts, Europe’s banking lobby has not been heard with its attempt to simply offset various capital buffers with one another. Apparently, the Commission was all the more willing to pull the registers elsewhere in order to keep the influx of capital in check. In an EBA model calculation, European specifics, such as exceptions for adjustments to the credit rating and simplifications in the calculation of operational risks as well as for the financing of small and medium-sized companies, reduced it by eight percentage points compared to 2019.

Even if Armageddon fails, the situation remains tense, especially for Germany’s major banks. For them, as particularly active users of internal models, the increase in capital requirements is likely to be roughly twice as high as for the rest of the industry. What is even more serious, for the entire industry, is that the Basel rules provide for drastically higher capital requirements for medium-sized companies without a credit rating, which are the rule in Europe and not the exception as in the Anglo-Saxon region. But where a solution tailored to Europe is required, the Commission can think of nothing better than a transition period running until 2029. Apparently she wants to force the capital markets union, in which the broad middle class also finances themselves via the capital market, with a crowbar.

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