BRUSSELS: European Union finance ministers reached an agreement on Friday on reforming bank capital rules, a major step towards boosting the bloc’s financial stability and a stepping stone towards a deal on a backstop for its bank-rescue fund in June.
The accord came after 18 months of heated debate among the 28 EU governments on how to apply new global bank capital rules that overhauled financial regulations after the 2007-2009 global crisis.
“The Council (of EU finance ministers) has agreed a general approach on the banking package,” said Vladislav Goranov, the Finance Minister of Bulgaria, the country that holds the EU presidency, at a public session of a meeting of EU finance ministers in Brussels.
The agreement paves the way for another breakthrough on the bloc’s bank-rescue fund, which ministers committed on Friday to equip with a backstop, although the final decision will be made only in June.
The two measures are seen as interlinked because the banking capital rules are expected to reduce bank risk, a move that would in turn allow more sharing of risk among euro zone countries in the form of a common backstop to prop up the sector’s rescue facility, known as Single Resolution Fund.
Under the accord, which still needs approval by EU lawmakers, European banks will have to abide by a new set of requirements aimed at keeping their lending in check and ensuring they have stable funding sources.
Germany and France fully backed the deal, others accepted it with some political reservations, while Italy and Greece abstained.
They argued that the deal on capital rules should be matched by an agreement on sharing banking risk by June.
Italy’s position, although in line with past statements, was partly dictated by the fact that it has yet to form a government after inconclusive elections in March.
Under the deal, the euro zone’s agency for troubled banks, the Single Resolution Board, will be given a clearer mandate to set the level of capital buffers that banks should hold against the risk of failure. — Reuters
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