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Barnier bites back over Basel jibes

Monday 12 September 2011 - by Andrew Hickley


Michel Barnier - photo by European Commission

EU internal markets commissioner Michel Barnier has hit back at suggestions that the US should not endorse the higher capital requirements laid out under the Basel III accord.

Releasing a statement in direct response to a call from JP Morgan chief executive Jamie Dimon to consider quitting the "anti-American" Basel Committee on Banking Supervision, Barnier insisted low levels of capitalisation and regulation were responsible for provoking the financial crisis.

Increasing compulsory capital and liquidity requirements, as internationally agreed, will help the banking industry become more "solid and stable", the Frenchman said.

Barnier also recognised that banks are likely to complain about having to hold higher buffers. "All members of the G20 have signed and undertaken to implement the commitments in Basel [III]," Barnier said on Monday, according to a translated version of his statement.

"It is not surprising that certain banks do not want to implement those requirements," he said, in referrence to Dimon's outburst.


Barnier urged US organisations to "not to have a short memory" and stick to international standards, as the EU did recently when transposing a fourth version of its capital requirements directive.

The European commissioner added that he is confident the US will ultimately take up their international commitment to endorse the measures.

Barnier's statement also commended the UK Independent Commission on Banking's recommendation that its large banks implement a ring-fence between their investment and retail operations.

He did however urge that supervision of both parts of the banks will remain "essential" under the proposals. "A ring fenced approach will still require strong supervision, both of retail and investment banks," he declared.

A senior commission source also brushed off ICB criticisms of the maximum harmonisation measure included under CRD IV.

Some commentators fear the provision may block the ICB's recommendation that banks hold 10 per cent of their common equity, well above the 7 per cent figure laid out under Basel III.


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READERS' COMMENTS
2011-09-13 14:02:07 | Per Kurowski
Basel regulations should be anathema to “The land of the brave and the home of the free”

By allowing banks to leverage more their capital when earning the risk-adjusted-interest-rate from those perceived as “not-risky” than when earning the same rate from those perceived as “risky”, regulators introduced a silly and unproductive risk-adverseness that is not compatible with “the land of the brave”

Allowing banks to leverage immensely more their capital when lending to sovereigns like the USA government, than when lending to American small businesses and entrepreneurs, is communism, and absolutely not compatible with “the home of the free”