European Union finance ministers have finally agreed to support higher risk buffers for the continent's banks. The move is to ensure that lenders will in future be better positioned to survive financial crises.
European banks will have to accumulate a higher level of core capital, EU finance ministers decided at a meeting in Brussels on Tuesday. It brings the 27-nation bloc closer to adopting the international Basel III guidelines which include stipulations for larger buffers against risk.
Tuesday's breakthrough came after months of bickering over the deal, with Britain torpedoing a possible settlement two weeks ago when London was not content with the size of the suggested requirements.
Some 8,300 banks will be affected by the new rules which still have to be negotiated with the European Parliament. The regulations would force banks across the continent to hold 7 percent core capital by 2019 to safeguard against future crises, up from just 2 percent right now. The measure would be phased in gradually from next year.
"There is still quite a long way ahead to go, but I think today we've taken a step in the right direction," British Chancellor of the Exchequer, George Osborne, said in Brussels.
Britainhad been among those holding out against an agreement, demanding the power to unilaterally adopt even more stringent rules for domestic lenders. And it basically got its way as the compromise reached on Tuesday gives individual member countries the right to insist on an additional 3 percent capital requirement for their own banks.
The European Union had been under pressure to adopt tougher rules for the banking sector since it was among the leading economies that endorsed the stringent Basel III capital guidelines in 2010. The aim is to prevent the need for bank bailouts and thus protect taxpayers across the continent.
hg/mll (Reuters, dpa, dapd)