Following the publication today of the US proposals for the implementation of Basel III rules, Caroline Liesegang, Head of Prudential Regulation and Research at the Association for Financial Markets in Europe (AFME), said:
“Today’s proposal from the US authorities is a significant and long-awaited step towards completing the global Basel reform agenda. While the detail will require careful assessment, the overall direction is now clearer.
“The proposal points to an increase in capital requirements, which for US global systemically important banks (G-SIBs) is expected to be broadly off-set by changes to G-SIB surcharges and reforms to the stress testing framework. In practice, this suggests that the overall impact on US banks is likely to be limited and could even result in a reduction in requirements for some firms. By contrast, banks in the EU are facing a more significant increase in capital requirements, raising important questions about the relative competitiveness of European banks.
“Removing the output floor for market risk is a divergence from international standards and we will carefully assess the impact on internationally active banks, in particular, with respect to the ongoing discussions on EU FRTB implementation and banking competitiveness in Europe.
“As implementation progresses, it will be important to ensure that the overall calibration remains consistent with international standards and recognises regional market specificities without creating unnecessary divergence across jurisdictions. Many of AFME’s members operate globally and maintaining a level playing field between the US, EU and UK frameworks will be critical to supporting competitiveness, efficient capital allocation and financial stability.
“We will review the proposals in detail and engage with policy makers to ensure the final framework achieves these objectives.”
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