Banks in the European Union are reportedly on track to meet stricter global capital requirements well ahead of the 2028 deadline, according to the European Banking Authority (EBA). The EBA’s monitoring exercise, which examined 157 banks across the EU at the end of 2022, revealed that EU banks would need approximately €600 million ($636 million) of additional Tier 1 capital to fully comply with the new framework by 2028.
The global Basel Committee introduced additional capital requirements in 2017 as part of its efforts to strengthen core mandatory buffers following the global financial crisis in 2008. Now, the EU, along with the United Kingdom and the United States, is incorporating the final Basel requirements into its rule books.
The EBA’s findings indicate that European banks’ minimum Tier 1 capital requirement would see a 9.0% increase at the full implementation date in 2028. However, EU policymakers have proposed longer phase-ins for certain rules and temporary waivers for others, potentially altering the timeline for implementation. In the EU, the rules are expected to be rolled out from January 2025.
In the United States, regulators have suggested commencing the “Basel Endgame” six months later, with a completion date set for 2028. This proposal has faced criticism from banks, who argue that the increased capital burdens will have a significant impact. In Britain, banks are also lobbying for the Bank of England to align its rollout start date with the US and to relax some of the rules in line with the EU’s approach. The Bank of England is expected to announce its final Basel Endgame rules in 2024.
These developments highlight the ongoing efforts by regulators to ensure the stability and resilience of the banking sector. While banks are making progress towards meeting the stricter global capital requirements, concerns remain about the potential impact on the industry and the need for a coordinated approach among different jurisdictions.
As regulatory bodies work towards finalizing the Basel requirements, it is crucial for policymakers to strike a balance between bolstering the banks’ financial strength and avoiding excessive burdens that could hamper economic growth. The implementation of these rules will be closely watched by industry participants, investors, and the public alike, as they will shape the future of the financial sector and its ability to weather future crises.
(Note: The article has been written based on the given text and has followed the BBC News style guide for reference.)
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