Media Briefing Note: Implementation of Bank Capital Rules

LONDON, 15 May 2012 - European Union finance ministers are meeting today to finalise discussions on Basel III. Commenting on the implementation of the new rules on bank capital and liquidity, Steven McEwan, Senior Consultant in Hogan Lovells' Financial Institutions Group, said:

"The implementation of Basel III in the EU will have crucial implications for banking regulation over the next decade.

"At a global level, there will be intense scrutiny of the fidelity that the EU shows to the Basel III proposals in its implementing legislation.  The extent to which the EU is faithful will shape the willingness of other countries, particularly the U.S. and emerging markets countries, to implement Basel III faithfully.  If the EU dilutes the provisions in its own implementation, it can hardly complain if others do the same.

"Within the EU, member states must select which issues are of key importance to them, and which can be dropped in an effort to compromise.  It appears that the UK government has chosen to fight for its freedom to implement the reforms proposed by the Independent Commission on Banking, including power to require retail banks to hold capital in excess of Basel III minimums.   If it succeeds in securing this flexibility, it will represent a significant concession to the UK, as some senior EU figures have argued strongly against member states having flexibility to impose higher capital requirements on their own banks."

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