Valdis Dombrovskis, EU commissioner for financial services, has promised to postpone the implementation of strict new capital rules for banks, saying that supporting lending must be an overriding priority in the fight against COVID-19 's epidemic.
Mr Dombrovskis's speech is likely to be welcomed by the European financial sector, saying that now is not the time to push for standards that force banks to increase their equity.
He welcomed the move by global regulators on Friday to delay the implementation of the new capital standards by a year and confirmed that the EU would ensure that European banks could benefit from it.
"this is a welcome development that gives us more time," Mr Dombrovskis said. "our intention is of course to take advantage of this possibility." He added that the move would help ensure that "banks provide financing for the real economy".
European policymakers are grappling with how to keep credit flowing during the crisis as millions of companies suspend operations and the economy slips into a deep recession.
The government has launched a loan guarantee scheme, and regulators have freed up lending capacity by reducing the capital buffers that banks must bear to cover possible losses on loans. EU officials pointed out that due to the underdeveloped capital markets, the EU economy is particularly dependent on bank financing.
Mr Dombrovskis said the EU would now "re-evaluate" its 2020 policy timetable, including legal advice in the second quarter to implement the latest round of international capital rules set by the Basel Committee on Banking Supervision (Basel Committee on Banking Supervision).
"now we are already adjusting our work plan and postponing some other workflows, and an one-year delay is certainly helpful," he said. "
The revision of the Basel rules has completely changed the standard of how banks should measure the risk of investment losses, and has become the theme of intensive lobbying activities in the banking industry. The banking industry warned that the changes could lead to higher capital requirements, forcing banks to tighten lending.
Regulators insist the measures will strengthen banks' ability to withstand shocks. These measures completed the Basel III (Basel III) rule manual developed after the 2008 financial crisis.
The European Banking Authority (European Banking Authority) estimated in December that the new standards could increase banks' capital requirements by 23 per cent compared with the benchmark level of June 2018, leaving a total capital shortfall of 124.8 billion euros.
But Mr Dombrovskis said that given that these standards needed to be implemented through European law, their impact would ultimately depend on policy choices at the EU level.
He pointed out that the Group of 20 leading nations had agreed not to allow this round of Basel rulemaking to lead to a further significant increase in overall capital requirements for the banking sector as a whole.
The Basel Accord will have legal effect in the EU only after the European Parliament (European Parliament) and governments have approved legislation on how to implement it. The committee is responsible for making these legislative proposals.
The heads of central banks and regulators around the world announced on Friday that they had delayed the implementation of the Basel III standards by a year. This change has affected several regulatory tasks completed between December 2017 and January 2019.
The move means that countries must now put in place a number of rules by January 2023 to revise the way banks measure capital to deal with credit, market and operational risks.
Measures to restrict banks from using their own internal models to measure capital requirements, the most controversial part of the plan, have been set to be implemented in phases over a longer time frame until 2027. It now needs to be fully implemented from January 2028.