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 The United States fared better in complying with bank capital rules
know as Basel III which constitute the world's core regulatory
response to the 2007-09 financial crisis that saw under-capitalized
lenders being rescued by taxpayers.
The global regulators who wrote the rules marked Europe down over
its lighter capital treatment on banks holding government debt, a
sensitive issue in a region where several countries had to be bailed
out.
The Basel Committee said its review of how the EU and United States,
which account for most global banking assets, apply the rules found
several instances where both fell short.
The committee, made up of supervisors and central bankers from
nearly 30 countries, graded the 28-country bloc as "materially
non-compliant", the lowest grade above a fail.
The United States was deemed to be "largely compliant".
Beyond Friday's "naming and shaming", Basel has no powers to enforce
its rules or sanction rule busters.
Europe was braced for criticism from the Basel Committee. But
lawmakers from the European Parliament, which approved EU rules
comprising an amended version of Basel III, said the changes made in
Europe were aimed at helping banks to finance the economy.
"The opinion of a body that is working without legitimacy and
without any transparency cannot modify the decisions taken
democratically by the European institutions," a cross-party group of
lawmakers said in a joint statement.
Basel said eight of the 14 components of Basel III it studied in
Europe met all minimum provisions and were compliant, while a
further four elements were largely compliant.
One element regarding bank exposures to government debt, and to
small and large companies, was "materially non-compliant".
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This element is crucial in determining how much capital a bank
should be holding to cover potential losses from defaulting debt.
The committee said it recognized that the EU would limit over time
the non-compliant treatment of bank exposures to sovereign debt.
An EU exemption on capital charges for certain exposures to
financial derivatives was also "non-compliant".
The United States was compliant in seven of 13 Basel III elements
reviewed, with a further four elements "largely compliant". Two
components, the framework for securitized or pooled debt and on
market risks, were "materially non-compliant".
The overall U.S. grade was better because the deviations have a
limited impact on financial stability and do not give American banks
any big competitive advantage, Basel said.
(Editing by Pravin Char)
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