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 The ECB said it wants to phase in new definitions of capital by
2018, rather than 2022 and, as part of this change, it will shorten
the period it lets banks include deferred tax assets in their
capital level.
It will also cut the transition period that allows banks to continue
including holdings in insurance subsidiaries in their common tier 1
equity.
European authorities have steadily increased their capital demands
on banks since the financial crisis, when a number of the
continent's banks needed bailing out by the state. Big lenders in
the euro area already face another increase as part of the
Supervisory Review and Evaluation Process.
Some banking industry figures have expressed concerns about the
increases, arguing that the sector has already amassed capital and
further demands would hold back lending, countering the ECB's own
efforts to boost lending growth.
As part of the revised rules, deferred tax assets would have to be
deducted from Common Tier 1 equity by the start of 2018 instead of
2022 and the same timeline would be set for phasing out the
non-deduction of insurance subsidiaries.
However, the rule change on deferred tax assets will not apply to
banks under restructuring, limiting the impact, while the insurance
clause will not apply to conglomerates, who are covered by the
so-called Danish Compromise and continue to enjoy the exemption.
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The ECB estimates the CET 1 ratio of the banks supervises is at 12.7
pct percent but would be 11.2 percent if all transitional adjustment
were already factored in.
Although much of the transition will be done by 2018, there will be
lingering effects until 2024.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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