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Report: Global banking regulators nearing capital rules deal

Banking regulators around the world are on the verge of finalizing the Basel III capital rules, with Europe and the U.S. set to compromise on a significant sticking point that has hindered the completion of the regulatory framework, Reuters reported Oct. 10, citing "banking and regulatory sources."

The Basel Committee on Banking Supervision reportedly met in the week beginning Oct. 2 to try to complete the regulatory package, having previously delayed its meeting to give officials additional time to overcome certain objections to the framework, such as the output floor.

The floor limits how much capital requirements based on a bank's own risk models can vary compared to how the capital levels would be calculated according to a regulator's more conservative model. Europe was seeking a floor equivalent to 70%, while the U.S. was looking for a floor set at 75%. A floor of 72.5% is most likely to be agreed upon now, according to the sources.

The sources noted that the new requirements would come in with an extensive phase-in; full implementation could take more than 10 years. Any potential deal, which could be finalized this week, will have to be approved by the Basel's oversight body, chaired by ECB President Mario Draghi, the sources added.

Meanwhile, French Finance Minister Bruno Le Maire told reporters on the sidelines of a EU finance ministers meeting in Luxembourg that a big increase in capital requirements should not be approved, according to the Reuters report. France still has concerns that a floor of more than 70% would mean substantial capital increases for its banks, according to the sources.