global banking regulations agreed in September could hit economic growth and put European banks at a disadvantage, European Central Bank Governing Council member Yves Mersch said yesterday.
Mersch, who heads the central bank of Luxembourg, also criticised plans for new European budget rules, saying they did not go far enough and that the European Parliament should tighten them.
“As the real economy is mainly financed by the banking system, financing conditions for companies without access to the capital markets would tighten and trigger a negative impact on economic growth,” he said of the new rules.
The new Basel III requirements will force banks to hold top-quality capital totalling seven per cent of their risk-bearing assets, more than triple what they do now. The capital levels are significantly lower than what banks feared and lenders will have until January 2019 to comply with some of the rules.
But the biggest international banks still face a capital surcharge on top of Basel III rules, to tackle concerns that banks deemed “too big to fail” may take risks that could derail the financial system.