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Report: Basel Committee insists on 75% output floor despite German resistance

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Report: Basel Committee insists on 75% output floor despite German resistance

Stefan Ingves, chairman of the Basel Committee on Banking Supervision, has proposed a two-year extension of the phase-in period for banks to adopt the new output floor for risk-weighted assets, but he remains adamant on keeping the floor at 75%, Germany's Börsen-Zeitung reported June 2, citing an internal memo from Ingves.

In the note, dated May 19 and marked confidential, Ingves said an "overwhelming majority" of Basel Committee members supported the proposed output floor, with only a few members opposing. He said 75% would be a good compromise as it would meet members hovering around 70% and others preferring an 80% floor in the middle.

The floor would require that lenders' internal models for calculating risk-weighted assets produce an outcome equal to at least 75% of the result that a standardized model would generate.

To make the transition to the new rules easier for lenders, Ingves also proposed to extend the phase-in period until 2027, having earlier proposed 2025. The note was addressed to the Group of Central Bank Governors and Heads of Supervision, which oversees the Basel Committee.

The output floor has been the most controversial part of final revisions to the Basel III regulatory framework, which many have dubbed Basel IV, and negotiations on finalization of the framework have stalled because of it several times.

According to Börsen-Zeitung, the fronts in the talks continue to harden. Felix Hufeld, president of the German financial watchdog Bafin, ruled out the possibility of a "compromise at all costs."

Supervisory authority sources have said Germany would not accept a floor above 70%, the newspaper added.