CAPITAL REQUIREMENTS : BASEL III-UNITED STATES: EUROPEAN BANKING INDUSTRY CRITICAL.

Better late than never. The Americans adopted, on 2 July, implementing provisions for the Basel III rules, the international reform that tightens up capital requirements imposed on banks. The European banking industry applauds this long-awaited advance, but is critical nonetheless: American banks will have to meet less stringent capital requirements than banks in the European Union and will consequently have a competitive advantage.

"The competitiveness of EU banks is clearly not level with that of their American counterparts," regrets Guido Ravoet, director-general of the European Banking Federation (EBF).

The Basel III rules, adopted in 2010 by the Basel Committee, aim primarily to tighten up capital requirements for banks. The committee agreed a phased-in implementation from January 2013 to 2019. The EU and the United States are therefore lagging seriously behind.

The Union adapted its rules with the CRD IV-CRR reform (a regulation and directive) adopted recently by the Council and European Union.

In line with Basel III, the American reform requires US banks active internationally to hold core tier one capital (the highest quality) equivalent to 7% of their risk-weighted assets.

"CRD IV has comparable requirements, but also carries several additional buffers, which at the discretion of member states could add up to 16% or 17% of core equity capital," explains the federation, which sees a lack of balance between the two...