EU Council Eases Basel End-Game Rules
Ahead of U.S. action on what is now being called the Basel “end-game,” the Council of the European Union today announced a set of compromises and delays to finalize the standard. The output floors (see FSM Report CAPITAL220) will apply at both the parent banking group and subsidiary banks, but EU banks will have the discretion to consolidate capital at the highest parent level in each EU nation. The Council release provides no details, indicating only “technical improvements” were made to the Basel credit-, market-, and operational- risk standards and small banks now have unspecified breaks, including with regard to disclosure.
BIS: CBDC Could Boost Deposit Rates, Small Banks
A new BIS staff paper differentiates its analysis of CBDC’s monetary-policy transmission impact by distinguishing between the extent to which large and small U.S. banks respond to different rates paid in interest on reserves (IOR). Large banks are found to be unresponsive to IOR changes, making CBDC necessary to force them to increase rates on deposits via the competition channel rather than a traditional monetary-policy tool. To the extent this reasoning takes hold, it could prove potent with Democrats who not only often favor CBDC, but are also increasingly angry about what they see as large-bank failures to raise deposit rates in lock-step with Fed hikes.