EU Parliament adopts "most comprehensive and most far-reaching banking regulation in European history" with overwhelming majority
"Today's decision makes European banks more resilient, so that no more taxpayers' money has to be used to prop them up", explained Othmar Karas MEP, Vice-President of the European Parliament. The new set of rules for banks, which was adopted with an overwhelming majority, comprises more than a thousand pages and is the basis for the planned banking union. "The new single rule book for all 8200 banks in the EU is the foundation on which the house of the Banking Union is to be built. The single supervisory mechanism will be the roof. As walls to the house, we must now feed in the Resolution framework for banks and the deposit guarantee schemes. The new set of rules is the most comprehensive and most far-reaching banking regulation in the history of the EU", he said. Karas was Parliament's negotiator for the law known as the CRD (Capital Requirements Directive) or Basel III.
Part of the new rules is that for the first time, there will be a cap on bankers' bonuses. Bonuses may not be higher than the salary. Only in exceptional cases, the shareholders of a bank may decide that bonuses may amount to a maximum of twice as much as the fixed salary. "The rules concerning bankers' bonuses do not regulate the amounts of the salaries. As legislators, we do not regulate salary levels. But we install fairness and transparency and we contribute to a change in culture", said Karas. The most important part of the new rules is tightened capital requirements for banks. From 1 January 2014 onwards, European banks have to put aside more and better capital to be prepared for possible crises. Unprecedented is the new rule that banks have to publish, country by country, what their profit is, how much tax they pay and how much they receive in subsidies. This increases transparency.
"The new capital requirements are key to an efficient banking supervision and therefore a crucial condition for the banking union", said Marianne Thyssen, EPP Group MEP responsible for the negotiations on the new single European banking supervision. "Today's large majority for the new banking regulation is a major success for Othmar Karas and an important step on the road to a safer banking sector. Both the new capital requirements and the reinforced European banking supervision will help to avoid crises. Prevention is better than cure", said Thyssen.
For the first time, criteria for the liquidity of bank capital are being introduced. Banks have to be able to fulfil their liabilities in stress situations for a period of at least 30 days. Particularly important to Othmar Karas has been making loans to Small and Medium-Sized Enterprises (SMEs) easier: "Banks must focus on their core business, which is financing the real economy." The new law reduces the capital requirements for loans to SMEs and business start-ups. Granting loans becomes easier this way. In addition, continental European banks are being strengthened in their competition with Anglo-American competitors by recognising the characteristics of European banks as decentralised structures and loss-sharing agreements. "Our aim is to make European banks as firm as a rock on the global financial markets", concluded Karas.