The European banking industry and analysts warned that the deal on banks' minimum capital requirements announced by the Basel Committee on Dec. 7 would unfairly penalize lenders in several countries and impact the competitiveness of the sector compared to international peers.
Several urged regulators to adapt the new measures when enforcing them through local regulations. Some observers said a phase-in period of the new rules around the output floor would limit the adverse impact of the so-called Basel IV standard, which will require European banks to hold an additional €40 billion in capital. The output floor announced Dec. 7 effectively limits the way banks use their internal models to calculate risk weightings on assets and means they can assign a risk weighting of no less than 72.5% of the calculation achieved by the standardized approach set by regulators.
However, the industry broadly welcomed the fact that central banks had finally reached agreement on the last chapter of the Basel III framework, nearly eight years after the rules were first implemented after the financial crisis.
These were some of the reactions (edited).
European Banking Federation CEO Wim Mijs:
The EBF said separately: "The situation of the European banking system and the economic conditions have significantly changed since the Basel Committee launched the 'Finalization of Basel III' program in 2014. The most recent data from the European Banking Authority shows that European banks have continued increasing their loss-absorbent capital.
"The ratio of highest-quality capital, fully loaded core equity Tier 1, has increased from 11.5% in December 2014 to 14.0% as of June 2017. Similarly, the fully loaded Tier 1 leverage ratio stands at 5.1% for the EU banking sector as a whole. Liquidity ratios have also improved across EU banks, showing that the problems that Basel III was meant to tackle have been to a large extent overcome in the EU."
The Dutch Banking Association:
"The next step is the implementation of the new Basel standards into European law. The European policymakers (European Commission, European Parliament and Council) will have to make their own assessments about this and may decide to amend the proposals to bring them more into line with European economic reality and regulations."
The Swedish Bankers Association:
"It is not reasonable that Swedish banks, which are already among the best capitalized banks in the world, will suffer harder than other banks by the new Basel regulatory framework. We assume that the implementation in the EU and Sweden takes place in a manner that does not jeopardize the risk-based capital requirements that are successfully used in Sweden," the association said, citing CEO Hans Lindberg.
"The estimations of the global management consulting firm Oliver Wyman indicate that the major Swedish banks will be required to hold [150 billion Swedish kronor to 200 billion kronor] in extra capital if a floor of 72.5% is introduced. If new regulation will be implemented requiring banks to hold extra capital, it will result in higher interest rates for both companies and households, which in the long run will have a negative impact on Swedish growth and welfare.
"The regulation will be very blunt when globally agreed standard methods, and not the actual risk, will form basis for the pricing of credit."
Swedish banks and Finansinspektionen, the Swedish Financial Supervisory Authority, are keen to keep a risk-based approach. To avoid new regulations having negative effects for Swedish banks, the EU and Sweden will have to adapt its regulation. For example, Finansinspektionen must revise the specific national requirements currently imposed on Swedish banks.
The Belgian Financial Sector Federation, Febelfin:
Mark Austen, CEO of the Global Financial Markets Association:
Karl-Peter Schackmann-Fallis, executive board member of the German Savings Bank Association:
He said German banks will be able to manage under the current regime thanks to their "good capitalization." He said the final agreement was "helpful" as it provides clarity for the financial sector.
Mark Carney, chair of the Financial Stability Board:

Tom Kinmonth, fixed-income strategist at ABN AMRO:
"Banks will be forced to hold extra capital ... It will be the public that has to put up the cash as banks reprice their portfolios. Banks will have to hold back capital; it won't be going to dividends and things like that. It's a bit of a shame really."
Pierre-Brice Hellsing, a Stockholm-based associate, financial institutions, at S&P Global Ratings:
In addition, Nordic banks have "strong ability to generate capital" compared with their European peers, Hellsing said, which means that they shouldn't struggle to build up their capital. This is largely down to the fact that they tend to have a "highly efficient" culture and good cost-to-income ratios thanks to digitization and low number of bank branches, he added.
Martin Neisen, partner and head of the Basel IV advisory team of audit firm PwC:
"Although the time for implementation of the reform package seems far away, banks need to take action now," he said. "It is clear that banks will need a lot of time, money and significant resources to understand, implement and manage the aftermath of the reform."
