Seven member states have written to the European internal market commissioner Michel Barnier urging the Commission to use a directive to push through the Basel III rules rather than a regulation.
Writing to the EC, the member states which include the UK, Spain and Sweden, warned Barnier against using the more prescriptive form of regulation which would mean member states would not have as much control over how the new rules would be implemented.
The member states say that a regulation would prevent countries from implementing varying capital levels or risk weights to suit the individual jurisdiction.
Basel III was aimed at setting minimum capital and liquidity requirements but there are concerns that the EU's approach could take a more prescriptive form by setting a maximum capital level, despite some countries perhaps wanting to set higher capital requirements.
Robert Finney, financial regulation partner at Dewey & LeBoeuf, says: "It's wrong to focus too much on whether Basel III is implemented in Europe through a directive or a regulation. The issue is flexibility, and either form of legislation can allow for the kind of flexibility that's needed here.
"The Commission and the new European Banking Authority are both determined to create a 'single rule book' to crack down on regulatory competition between member states.
"But they seem to be going further than the approach of having 'a harmonised set of core rules', as recommended by the post-crisis de Larosière Report in February 2009.
"It is one thing to restrict or remove the 100+ discretions and options currently available to national regulators under the 2006 Capital Requirements Directive, but quite another to forbid member states to impose...
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Writing to the EC, the member states which include the UK, Spain and Sweden, warned Barnier against using the more prescriptive form of regulation which would mean member states would not have as much control over how the new rules would be implemented.
The member states say that a regulation would prevent countries from implementing varying capital levels or risk weights to suit the individual jurisdiction.
Basel III was aimed at setting minimum capital and liquidity requirements but there are concerns that the EU's approach could take a more prescriptive form by setting a maximum capital level, despite some countries perhaps wanting to set higher capital requirements.
Robert Finney, financial regulation partner at Dewey & LeBoeuf, says: "It's wrong to focus too much on whether Basel III is implemented in Europe through a directive or a regulation. The issue is flexibility, and either form of legislation can allow for the kind of flexibility that's needed here.
"The Commission and the new European Banking Authority are both determined to create a 'single rule book' to crack down on regulatory competition between member states.
"But they seem to be going further than the approach of having 'a harmonised set of core rules', as recommended by the post-crisis de Larosière Report in February 2009.
"It is one thing to restrict or remove the 100+ discretions and options currently available to national regulators under the 2006 Capital Requirements Directive, but quite another to forbid member states to impose...
www.gfsnews.com
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