Unlock Editor’s Digest for free
FT editor Roula Khalaf picks her favorite stories in this week’s newsletter.
The EU will delay the implementation of key provisions of post-crisis banking reforms by one year, arguing that an expected delay in the implementation of the Basel accord in the US would disadvantage creditors in Europe.
The move, pushed by France, casts further doubt over the enforcement of the so-called Basel III package, an ambitious overhaul of banking regulation agreed in the wake of the 2008 financial crisis that the EU planned to complete by 2025.
Following signals that US regulators will allow their timeline for the so-called “Basel Endgame” to slip, the European Commission has decided to postpone the “fundamental review of the trading book” (FRTB) to January 2026.
“Basically, it’s a level playing field. Given all the evidence and the delays elsewhere, we have decided to delay the market risk rules,” Mairead McGuinness, EU Commissioner for Financial Services, told the FT.
The specific reforms, which were introduced in 2016 as measures to stop gambling with the regime, would require investment banks to hold more capital in their wholesale trading portfolios to limit market risk when buying and selling securities from clients.
McGuinness confirmed that the EU would delay concrete reforms by one year, adding: “I hope the US and other jurisdictions will adopt the standards faithfully and quickly.“
Big eurozone lenders have long pushed for the rules to be delayed, arguing that the introduction of stricter capital requirements would put them at a disadvantage compared to US and UK banks.
“If you cannot offer corporate clients the same products and conditions from day one, you will lose competitiveness in trading,” said Gonzalo Gasos of the European Banking Federation.
French President Emmanuel Macron recently called on the EU to “review the application” of Basel, saying the EU “cannot be the only economic area in the world to apply it”.
A Commission spokesman said the rest of the remaining Basel implementation package would apply from 2025 as planned.
The US had planned to implement its version of the Basel Endgame rules by July 2025, but initial proposals from US regulators were met with aggressive lobbying efforts by banks. Regulators received hundreds of comments in response to the original proposal.
Jay Powell, chairman of the Federal Reserve System, which is part of the US effort behind Basel Endgame, said earlier this year that “broad and material changes” were likely to be made to the final rule.
He did not rule out a redraft, rather than a simpler overhaul of the rule. The Fed is currently working with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to address comments from the financial industry.
Federal agencies rarely decide on re-proposals, which delay the rulemaking process. However, issuing final measures that differ significantly from the original proposals may expose the agencies to criticism for depriving the public of a comment period to weigh in on the improved rules.
McGuiness also expressed deep frustration at the EU’s failure to make progress in integrating its financial markets, complaining that the commission’s latest proposal to harmonize the EU’s 27 different insolvency laws had been “significantly weakened” by parliament and member states.
At an event in Frankfurt on Tuesday, she said failure to do more – such as proposals to revive securitization markets that package bank loans and sell them to investors – would have “huge costs” as it would deprive Europe of funding. it needs to address its main economic challenges, including the green transition and digitalisation.
McGuiness, whose term as commissioner is due to end in October, urged governments to stop thinking about what they “could lose” at national level and to think more about “what they could gain” from Europe as a single market. “Conservation is not growth,” she said, adding that “nibbling at the edge of the problem is not going to work.”
Additional reporting by Claire Jones in Washington and Martin Arnold in Frankfurt