The European Commission will ask lenders for input regarding Basel III rules before their implementation, raising the prospect that the regulations could be diluted, Reuters reported.
A spokesman for the Commission said it will "carry out a thorough impact assessment of the proposed changes" and conduct a public consultation with various stakeholders, according to the newswire.
The reforms, which require banks to hold significantly more capital following the financial crisis, were drafted by the Basel Committee on Banking Supervision in December 2017. The rules are due to be implemented by Jan. 1, 2022, and fully phased in by Jan. 1, 2027.
The European Banking Authority has called for a full implementation of the Basel III bank rules, which could increase the minimum capital requirement by 24.4% on average under conservative assumptions, implying an aggregate shortfall in total capital of about €135.1 billion. Large banks had a €23.5 billion target capital shortfall at the end of 2018 based on the rules, according to the Bank for International Settlements.
The European Banking Federation warned that lenders may face market pressure to exceed minimum requirements, a move that could impact dividends, while some lenders are still trying to shed bad loans from the financial crisis.
France has been the most vocal in its opposition to the rules, saying that the capital demands are too high, and the regulations could see European banks becoming less competitive than their U.S. counterparts.
