Updated: May 21, 2012 (Initial publication: May 2, 2012)
Breaking news
The Council of Finance Ministers of the European Union member states meets to discuss about the transcription of Basel III in a Directive.
http://thejournalofregulation.com/spip.php?article1434
Prudential rules on the own funds of banks adopted by the Basle Committee are biding as soon as they will be transposed in a binding legal text. The new rules of Basel III must take the force of a European directive. This gives rise to a new discussion, nor between the central bank governors (as in Basel), but between Finance Ministers of the European Union member states, in Brussels. On this occasion, each State defends the interest of its banks; the rule advocated by him corresponds to its banking structure or its type of banking business. In any case, the banks, anticipating the application of Basle III, have already integrated the prudential requirements in their accounts, hoping that their State will preserve it.
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The regulation concerns only the market structures and behaviours of the actors. It may be differently when what is happening within the actors in the market (strength, organisation of power, decision-making, governance) can have a direct effect on the entire sector. The most evident example is that of the banking sector, for which a bank is a systemic agent, whose failure represents a risk for the entire sector.
That’s why the prudential, that allows taking away the prospect of failure, is in articulation with, even blends, in the regulation. The central bank governors are thus within the "Basel Committee", which is an organization that does not have a proper legal force. That is how that these standards are repeated in binding legal texts, in a legal system, that they take the force of law. On the occasion of this kind of "crossing of the atmosphere" prudential standards adopted by the Basel Committee, the authors of the legal standards can renegotiate.
Thus, prudential standards requirements of equity and quasi-equity for banks, newly raised by what is called "Basel III" must become a European directive, the 4th in the matter: the Capital Requirement Directive (CRDIV), including the project was drafted by the European Commission on 20 July 2011.
Thus, all the Finance Ministers of the Member States meet regularly to discuss the terms of this directive and obtain facilities (exception for a country) or adjustments to the original text, which is legally a preparatory work. That is why the meeting held on 2 may in Brussels between the Finance Ministers of European countries is important.
The France is seeking that the Basel III requirements do not apply in their full rigour in bancassurance, due to the importance of life insurance for French banks. The Germany wants that we considered as own funds, equity interests held by the Landers in the banks. The United Kingdom wants to increase the percentages required by standards, which promote the English banks.
Anyway, it is certainly true in law that these norms become binding only once they will be adopted by a legally binding text. It is also true that States take advantage of this necessary time of the "translation" in the law of standards informally adopted to resume the discussion, as shown the claims of one and other.
But if you look at the behaviour of the subject, namely the banks themselves, they already applied the requirements of Basel III. Indeed, the control system is so auto-observed and the authority of the Basel Committee recognized so that the observation of what is said is sufficient to produce the constraint.
Then discussion is about the margins. It is the purpose of the meeting on May 2, 2012.
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