Brussels: European Union (EU) finance ministers reached on Friday an agreement on reforming bank capital rules, a major step to boost the bloc’s financial stability and to agree on a backstop for its bank-rescue fund in June, officials said.

The deal came after 18 months of heated debates among the 28 EU governments on how to apply new global bank capital rules that overhauled financial regulations after the 2007-2009 global crisis.

“The Council (of EU finance ministers) has agreed a general approach on the banking package,” said Vladislav Goranov, the Finance Minister of Bulgaria, the country that holds the EU presidency, at a public session of a meeting of EU finance ministers in Brussels. </s> BRUSSELS (Reuters) - European Union finance ministers reached an agreement on Friday on reforming bank capital rules, a major step towards boosting the bloc’s financial stability and a stepping stone towards a deal on a backstop for its bank-rescue fund in June.

The accord came after 18 months of heated debate among the 28 EU governments on how to apply new global bank capital rules that overhauled financial regulations after the 2007-2009 global crisis.

“The Council (of EU finance ministers) has agreed a general approach on the banking package,” said Vladislav Goranov, the Finance Minister of Bulgaria, the country that holds the EU presidency, at a public session of a meeting of EU finance ministers in Brussels.

The agreement paves the way for another breakthrough on the bloc’s bank-rescue fund, which ministers committed on Friday to equip with a backstop, although the final decision will be made only in June.

The two measures are seen as interlinked because the banking capital rules are expected to reduce bank risk, a move that would in turn allow more sharing of risk among euro zone countries in the form of a common backstop to prop up the sector’s rescue facility, known as Single Resolution Fund.

Under the accord, which still needs approval by EU lawmakers, European banks will have to abide by a new set of requirements aimed at keeping their lending in check and ensuring they have stable funding sources. </s> BRUSSELS (Reuters) - European Union finance ministers reached an agreement on Friday on reforming bank capital rules, a major step towards boosting the bloc’s financial stability and a stepping stone towards a deal on a backstop for its bank-rescue fund in June.

The accord came after 18 months of heated debate among the 28 EU governments on how to apply new global bank capital rules that overhauled financial regulations after the 2007-2009 global crisis.

It paves the way for another breakthrough on the bloc’s bank rescue fund, which ministers committed on Friday to equip with a backstop, although the final decision will be made only in June.

The two measures are seen as interlinked because the banking capital rules are expected to reduce bank risk, which would allow more sharing of risk among euro zone countries in the form of a common backstop to prop up the sector’s rescue facility, known as Single Resolution Fund.

Germany’s Finance Minister Olaf Scholz said after the meeting that the deal was a good start that would provide momentum towards further progress in the area.

Under the accord, which must be approved by EU lawmakers, European banks will have to abide by a new set of requirements aimed at keeping their lending in check and ensuring they have stable funding sources.

Germany and France fully backed the deal, others accepted it with some reservations. Italy and Greece, which abstained, said the deal on capital rules should be matched by an agreement on sharing banking risk by June.

Italy’s position, although in line with past statements, was partly dictated by the fact that it has yet to form a government after inconclusive elections in March.

FILE PHOTO: European Union flags flutter outside the European Central Bank (ECB) headquarters in Frankfurt, Germany, April 26, 2018. REUTERS/Kai Pfaffenbach/File Photo

FAVOURABLE TREATMENT

Under the deal, the euro zone’s agency for troubled banks, the Single Resolution Board, will be given a clearer mandate to set the level of capital buffers that banks should hold against the risk of failure.

The so-called Minimum Requirement for own funds and Eligible Liabilities (MREL), which introduces into EU legislation the global standard known as Total Loss Absorbing Capacity (TLAC), will be set at 8 percent of large banks’ total liabilities and own funds.

The SRB will, however, be able to require higher buffers for banks it deems insufficiently safe, or a lower buffer for better capitalised institutions.

Ministers agreed on a more favourable capital treatment for large banks in countries that belong to the bloc’s banking union, such as France’s BNP Paribas (BNPP.PA), Netherlands’ ING (INGA.AS) and Italy’s Unicredit (CRDI.MI), as their exposure to other countries in the bloc will be treated as a safer domestic exposure.

The agreement “will allow our banks to better finance households and firms in France and in Europe,” the French Finance Minister Bruno Le Maire said.

However, Britain’s finance minister Philip Hammond and ministers from smaller EU states said that departure from global standards could heighten risk.

The new rules would also require large foreign banks to set up intermediate parent undertakings (IPUs) that would bring their EU operations under a single holding company. The move effectively mirrors U.S. rules and is seen as crucial to protecting the bloc’s financial stability against risks posed by major banks.

SHARING RISKS

In a minor concession to reluctant states, ministers reiterated their intent to reach an agreement on a state-funded backstop for the euro zone’s bank-funded Single Resolution Fund.

FILE PHOTO: Bulgaria's Finance Minister Vladislav Goranov attends an EU finance ministers meeting in Brussels, Belgium, May 25, 2018. REUTERS/Yves Herman

The fund is currently equipped with 17 billion euros ($19.9 billion), but that is not considered enough to cope with a larger banking crisis.

The backstop is expected to be provided by the euro zone’s state-backed bailout fund, the European Stability Mechanism.

Another measure of risk sharing, a common insurance of covered bank deposits, is still far from being agreed, despite being a pillar of the banking union, the EU’s flagship project to strengthen its banking sector after years of crisis. </s> BRUSSELS (Reuters) - European Union finance ministers are likely to agree on Friday to new banking capital rules in a major step toward enhancing EU financial stability, but the deal could be delayed because Italy’s political crisis, EU officials said.

The potential delay could be seen as a first sign of how Italy’s prolonged crisis and its emerging eurosceptic government could further slow the bloc’s already sluggish reform process.

An agreement on the banking reform would come after 18 months of heated debates among the 28 EU governments on how to apply new global bank capital rules that overhauled financial regulations after the 2007-2009 global crisis.

Countries have battled for months over the level of capital buffers that banks should hold against risk of failure and the powers of the EU agency for troubled banks, the Single Resolution Board, to enforce these capital requirements.

But the major hurdles have now been cleared and a deal could be finalised on Friday when EU finance ministers gather in Brussels for a regular meeting, three European officials said.

Germany and France, the two main economies of the euro zone, are ready to back the main elements of a compromise put forward by the Bulgarian presidency of the EU, officials said.

The deal would give the SRB a clearer mandate in setting banks’ capital buffers, known as Minimum Requirement for own funds and Eligible Liabilities (MREL).

But the finalization of the agreement could be postponed because Italy, the euro zone’s third largest economy, might not be able to endorse the deal, as the country is in the process of forming a government, one EU official said.

An agreement on the banking package requires a qualified majority of EU member states and could be sealed even if Italy opposed it. But, given the importance of the proposals, the Bulgarian presidency could opt for a postponement of the vote, as it did at a meeting in March to wait for the swearing-in of the new German government.

The possible delay would however highlight EU discomfort at dealing with a new Italian government of the anti-establishment 5-Star and the far-right League dedicated to a high-spending program that calls into question crucial fiscal and banking rules of the European Union.

The decision on whether sealing or delaying the deal will be made on Friday after a public debate among EU finance ministers, a spokeswoman for the EU’s current Bulgarian presidency said. </s> BRUSSELS, May 24 (Reuters) - European Union governments are considering new rules to counter money laundering after alleged wrongdoing at two banks in smaller states of the bloc flagged risks to financial stability, according to officials and an EU document.

The possible move follows the collapse of Latvian bank ABLV in February and the freezing of operations at Malta's Pilatus Bank in March after allegations of money laundering.

In both cases, the alleged wrongdoing was exposed by U.S. authorities and not by EU watchdogs -- a situation that the head of euro zone banking supervision, Daniele Nouy, said was "very embarrassing" as it showed weaknesses in European oversight.

European finance ministers discussed how to strengthen the EU oversight at an informal meeting in April and are likely to address the topic again in regular monthly meetings later on Thursday and on Friday, as part of discussions on banking rules reform, three EU officials told Reuters. "EU states agree that the existing anti-money laundering provisions are not sufficient," one of the officials said, reporting discussions held by EU states' envoys last week to prepare this week's meeting of finance ministers.

Banks are free to move capital across EU states and beyond, but checks on money laundering and other financial crimes remain largely a national competence -- a mismatch that EU authorities say could hamper controls and create financial stability risks.

The recent banking troubles in smaller member states have strengthened the arm of those who want to enhance EU oversight powers, overcoming long-standing resistance in some capitals to relinquish national competence on this.

Some states are calling for a new body to be set up to counter money laundering at EU level, while others favour the idea of giving more power to one of the existing EU financial regulators, like the European Banking Authority.

A less bold option would entail a tighter application of existing anti-money laundering rules, which have been overhauled several times in past years, with the latest reform due to be applied by 2020, officials said.

One of the options on the table could be agreed upon before an EU leaders' summit in December, officials said.

The talks follow a letter sent by the EU Commission to the bloc's financial regulators in which the EU executive urged better cooperation against money laundering to avoid "serious detrimental effects on the financial soundness of individual institutions," the document seen by Reuters said.

EBA and the European Central Bank declined to comment on the letter.

The Commission urged that EU powers to revoke banking licences in case of money laundering concerns be clarified.

EU rules give the ECB the role of granting and withdrawing banking licences in the euro zone, but do not give Frankfurt a clear mandate to prevent money laundering, which remains the job of domestic supervisors.

These limits were evident in the Pilatus case. The Maltese bank had for long been a concern for euro zone supervisors, an ECB official told Reuters. But it maintained its licence.

Maltese authorities froze the bank's accounts and assets only after Pilatus' Iranian chairman was arrested in the United States under charges of money laundering and bank fraud. </s> FILE PHOTO - British and EU flags are seen prior to the arrival of British Prime Minister Theresa May and European Commission President Jean-Claude Juncker, ahead of the European Union leaders summit in Brussels, Belgium October 17, 2018. REUTERS/Francois Lenoir

AMSTERDAM (Reuters) - The Dutch financial markets authority (AFM) said on Monday it was preparing for a 20-fold increase in financial trading taking place on its infrastructure in the event that Britain leaves the European Union in March with no deal in place.

The AFM said that while banks are shifting operations to Frankfurt and Paris, and asset managers to Luxembourg and Dublin, trading houses are converging on the Netherlands as an alternative to London after Britain leaves the bloc.

“While border and customs negotiations are attracting attention, there is a fairly invisible shift taking place in European capital markets,” it said in a statement.

“The AFM is conducting conversations with more than 150 parties that are interested in a (Dutch trading) license.”

AFM Chairwoman Merel van Vroonhoven said she expected 30-40 percent of European trading in financial instruments will wind up being housed in the Netherlands, making it the center of EU financial trading. </s> Billy is the editor of Verdict. You can reach him at billy.bambrough@verdict.co.uk

Eurozone finance ministers will convene in Brussels today to decide who will be the next European Central Bank (ECB) vice-president.

Ministers are also expected to review Greece’s economic adjustment programme, the reform of the European Stability Mechanism.

Last week it was revealed the economic committee of the European Parliament sees Irish central bank governor Philip Lane as a stronger candidate for the post of European Central Bank vice president than Spanish economy minister Luis de Guindos.

However, after intense lobbying of German chancellor Angela Merkel and other leaders by Mariano Rajoy, Spain’s prime minister, Guindos would appear on track to win support for the job today.

Vitor Constancio has been ECB vice-president since June 2010. Before that he served as governor of the Bank of Portugal from 2000.

Officials from Austria, Cyprus and Finland say they are leaning toward supporting Guindos, according to the Bloomberg survey.

Euro zone ministers pick a candidate today with a formal vote tomorrow when they are joined by non-euro zone EU finance ministers.

The candidate then has a hearing with the parliament’s committee and the ECB is asked for an opinion.

Who are the two candidates?

Lane is a member of the ECB’s governing council and is well versed in how the Bank works — this could be a deciding factor in the race.

However, there have been reports suggesting Lane is more interested the position of ECB chief economist, which will be vacant next year.

Guindos — a former finance minister but not a central banker — was criticised by the European Parliament for not having the right kind of experience for the ECB role.

As finance minister in the Spanish conservative government since 2011, he is the longest-serving member of the Eurogroup — and ran to be its president in 2015.

Guindos worked previously at Lehman Brothers bank and the PriceWaterhouseCoopers consultancy firm.

What was said:

The economic committee of the European Parliament chairman Roberto Gualtieri said in a statement:

Sven Giegold, the spokesman for economic and financial affairs for the Greens/EFA Group in the European Parliament, said:

The appointment will be the first in a reshuffle in positions within the central bank that could change the course of its monetary policy.

Four out of six positions within the ECB executive board will have to be replaced by the end of 2019. The first of these will take place on June 1, which will be the new vice president’s first day on the job. </s> LONDON (Reuters) - Global banks must plan for a “hard” Brexit or risk breaching regulatory requirements and disrupting business, according to an industry report seen by Reuters, the first since Prime Minister May said she would take Britain out of the single market.

A sign for Bank Street and high rise offices are pictured in the financial district Canary Wharf in London October 21, 2010. REUTERS/Luke MacGregor

Banks’ transformation programs are so complex and lengthy that in some cases they may need to devise two-step interim contingency plans in order to mitigate the risks of disruption, the report says. It was prepared by consultancy PwC for industry body the Association for Financial Markets in Europe (AFME).

The process will require more clarity from regulators in EU countries where banks might seek a new base and need approval of any interim business models, the report says, noting the lack of visibility on future trading relations between Britain and the EU with negotiations yet to begin.

“The report, ‘Planning for Brexit – Operational impacts on wholesale banking and capital markets in Europe’ aims to provide policymakers and other industry stakeholders, both in the EU27 and the U.K., with a fact-based analysis of how these challenges are likely to affect the financial services industry,” a spokeswoman for AFME said in an emailed statement.

The report analyzed information garnered from 15 banks of varying sizes and from different home regions on their Brexit planning measures and also looked at 8 case studies of banking transformation programs in the past that have taken longer than 2 years.

The findings offer stark reading on what lies ahead for banks as they attempt to devise strategies to cope with any impending disruption to their business once Britain leaves the European Union, mapping out 25 key business activities that will be impacted from staffing to establishing new legal entities.

Several major banks have already warned that they will each have to move thousands of jobs to another EU country in order to continue providing services to European clients once Britain leaves the bloc, after Prime Minister Theresa May said that Britain would leave the single market.

Banks are already implementing “no regrets” contingency measures such as retaining legal entities, the report finds.

In order to adapt to the post-Brexit landscape banks will need to set in motion a wide range of interacting transformation programs ranging from restructuring legal entities, gaining regulatory approvals, connecting to new market infrastructure and moving staff to new locations.

Some banks’ contingency plans will be achievable within two years whilst others could take at least 4 years to implement, depending on their current European footprint.

A transition period of 3 years would alleviate some of the pressures posed in implementing the necessary changes as well as support from regulators in Europe to speed up license approvals and to avoid any uncertainty that could lead to duplication costs and avoidable disruptions. </s> AMSTERDAM (Reuters) - The Dutch financial markets authority (AFM) said on Monday it was preparing for a 20-fold increase in financial trading taking place on its infrastructure in the event that Britain leaves the European Union in March with no deal in place.

The AFM said that while banks are shifting operations to Frankfurt and Paris, and asset managers to Luxembourg and Dublin, trading houses are converging on the Netherlands as an alternative to London after Britain leaves the bloc.

“While border and customs negotiations are attracting attention, there is a fairly invisible shift taking place in European capital markets,” it said in a statement.

“The AFM is conducting conversations with more than 150 parties that are interested in a (Dutch trading) license.”

AFM Chairwoman Merel van Vroonhoven said she expected 30-40 percent of European trading in financial instruments will wind up being housed in the Netherlands, making it the center of EU financial trading.
EU finance ministers reach an agreement on reforming bank capital rules.