EU Faces Basel Bank Capital Scrutiny as Regulators Police Rules
By Jim Brunsden
European Union bank-capital rules, already criticized by global regulators, face another international probe just months after they start to take effect next year. The Basel Committee on Banking Supervision will review how well the EU has applied its standards, Wayne Byres, the group’s secretary general, said in an interview. An earlier investigation, based on a draft version of the EU plans, pointed to loopholes and triggered a rebuttal from Michel Barnier, the bloc’s financial services chief. The EU emerged bruised from last year’s process that cast doubt on its claims to be fully in line with a global pact to beef up banks’ defenses to avoid a repeat of the 2008 financial crisis. While the Basel group has also indicated that the U.S. will face a follow-up review, the chances that the EU will be judged non-compliant are much higher, said Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc. “The EU will fare far less well under Basel scrutiny because of the tremendous flexibility afforded banks” in measuring their capital requirements, Petrou said by e-mail.