Ecofin highlights EU divisions on bank capital rules

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European Finance Ministers on Wednesday met in Brussels to agree on new capital requirement rules for banks. The new law affects over 8000 banks across Europe. It aims to give them more flexibility to protect themselves against future financial crisis.

The Danish presidency hopes to reach a deal on the new capital rules among EU member states before the summer. Their proposal would allow national regulators to ask for a 3% increase of capital without permission from the European Commission. Anything above that would still have to get the green light from Brussels.

“Basically what we are doing discussing capital requirement is to make sure that the financial sector is sound and solid both in order to avoid crisis but of course also in order to enable the financial sector to provide guarantees, loans, whatever for businesses in order to make them create jobs”, said Margrethe Vestager, Economics Minister for Denmark, EU Presidency H1 2012.

The EU countries strongly disagree on how flexible they can be at national level in applying the rules.  The UK and Sweden claim more flexibility would protect taxpayers from having to pick up the bill of busted banks.

But France, Germany and the European Commission want a tougher limit, applicable equally to all member states. A lack of harmonization would lead to imbalances and distort the single market, they argue.

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