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EU hails bank liquidity deal as 'fundamental' for economic recovery

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Published 08 January 2013, updated 09 January 2013

The European Commission has hailed an agreement by global regulators in the Basel Committee, which gave banks four more years and greater flexibility to build up cash buffers so they can use some of their reserves to help struggling economies grow.

Michel Barnier, the EU's internal market commissioner who is in charge of regulating the banking sector, hailed the agreement saying: "This is the first time in history that regulators are defining globally harmonised, quantitative liquidity standards."

The deal on liquidity rules, Barnier added, "is fundamental, both for the stability of banks as well as for their role in supporting wider economic recovery."

On Sunday, the Basel Committee gave banks four more years to build a backstop against future financial shocks and allowed a wider range of assets, including stocks, residential mortgage-backed securities and lower-rated corporate bonds.

The liquidity rule is part of the Basel III framework that will force banks to hold up to three times more basic capital than before the crisis to avoid taxpayers having to bail them out.

Under the deal, seen as a victory for the financial sector, banks must comply with the rule by 2019 and can now include a wider range of risky assets in the buffer.

Banks had complained they could not meet the January 2015 deadline to comply with the new rule on minimum holdings of easily sellable assets, known as the liquidity coverage ratio, and at the same time supply credit to businesses and consumers.

Challenges ahead

Yet, there are plenty of challenges ahead on how to implement those rules.

Only 11 of the G20 countries met this month's deadline for implementing Basel III, with the United States and European Union failing to get their rules in place.

Negotiations on an EU law to implement Basel III resume on Thursday (10 January) and some lawmakers want to dilute the liquidity rule further than Basel has done by allowing banks to include any asset central banks accept as collateral.

Under the Basel regime, the rules would run alongside separate rules governing banks' capital, intended to ensure their longer-term stability, known in Europe as CRD4.

"I now call upon the Parliament and the Council to successfully conclude the CRD4 trilogue negotiations in the coming weeks," Barnier said.

EurActiv.com with Reuters

COMMENTS

  • I use the term "fictitious capital" to describe what the Big Bankers, public and private, are attempting to inflict on the ordinary 99% people who through their entrepreneur led labour create ALL REAL value, capital included.
    In the middle of the 19th century Karl Marx coined this term to describe the notes and loans that governments and gentry used to finance wars, luxuries, estates and otherwise living beyond their REAL means.
    At that time such paper would accrue during "Boom" times as the economy expanded and would usually max out at around 10-12% of a countries GDP. As long as the good times rolled on it was not a problem, but came a crisis of over production (of all the wrong things) there would be the day of reckoning. Ergo, the bill collectors came and cash not paper promises was the order of the day. This resulted in a variety of ways to settle; some were paid in part or in full but more often bankruptcies and swindles resulted. Then the stage was set for the next cycle - boom bust.
    Today though the situation with 'fictitious' or 'counterfeit capital is vastly different.
    100 years of pumped up growth for growths sake first based on the now discredited ideas of John Maynard Keynes has produced a situation where some 20 times the worlds gross product exists as fictitious capital, a counterfeit collection of deficits, bills, bonds, exchanges, derivatives, swaps and the latest fraud, "quantitive easing". (Le Monde Diplomatique puts it at 50 times)
    $$Dollars, Єєuros, Rubles, Ль, &с…all the same!!
    To grasp the idiocy inherent in these figures imagine approaching your friendly personal banker for a loan, line of credit or mortgage some 20 times your net collateral worth; how far do you suppose that might fly?
    Yet with the above listed gimmicks, that is precisely what members of the bankster clique do amongst themselves.
    Every day we read of new Central and private bank meetings, "Increasing capital base" is their current fad.

    OFF THE WALL!

    There is not a farthing of REAL capital in all of this rat-bag of lies, swindles and manipulations.
    REAL capital is ONLY accumulated labour dedicated to enhancing future production. Ergo entrepreneur led LABOUR (of the 99%) is the only source that can augment existing capital or create new.
    The banksters, led by the IMF, USA FED, and British "financial services" are well aware of this fact but that will not stop them from attempting to download this fraud onto the REAL product of Labour in the form of "bailouts" of "sovereign" debts, to be serviced by taxes on the REAL producers.
    The 99% will be robbed of (much prepaid) social services and benefits to service "debts". “Austerity” it is called when those who had NO hand in running up this fraud are required to pay interest that will amount to 40-60% of the future product of their labour. Gone will be pensions, good schools, decent medical care, infrastructure (e.g. utilities that work reliably), environmental protection; even adequate diets will be history.

    "Let them eat cake!" exclaimed La Royale Marie Antoinette.
    Let them eat (genetically modified) garbage, implies La Grande Dame Christine La Garde, of the international Monetary Fascists(IMF)

    So Greece, you are the front line today, Italy and Spain may be next, but do not think that any country, including the relatively well off Germany or the resource rich Canada and Australia will be forever exempt. Ms Merkel, beware!
    The "poor little ones" are but appetizers; they will whet the appetites of these financial service vultures and jackals. For certain, like buzzards flocking to road kill. if they succeed in the beginning the taste of financial carrion will make them hunger for more, and they will finish only when the 99% of humanity is subject as debtors to enslavement by the 1%.
    But this does not have to be!
    Greece you can repudiate the fraud! Lead the way! DEFAULT is the way to go!
    99%; be inclusive! Support Greece today, Italy Spain, …, &c. tomorrow and.../?/ the world in future.
    Hold on to your souls! Hang tough!
    You have a WORLD to WIN!!

    Too those of you who may have seen this one previously, Churchill’s advice immediately springs to mind:
    “When you have an important point to make, don’t try to be subtle or clever. Use a pile-driver. Hit the point once. Then come back and hit it again. Then hit it a third time – a tremendous whack.”

    By :
    david tarbuck
    - Posted on :
    10/01/2013
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Michel Barnier, EU internal market Commissioner (photo: EC)
Background: 

The Capital Requirements Directive (CRD), adopted in 2006, is currently undergoing its fourth review at the European Commission (EurActiv 01/03/10).

EU rules on capital requirements are designed to protect savers and investors from the risk of the failure or bankruptcy of banks. They ensure that these institutions hold a minimum amount of capital. 

In July 2011, Germany was the only member of the Basel Committee of banking supervisors and central bankers to refuse to endorse draft rules on new minimum levels of capital which banks will have to hold.

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