EU Commission proposes tweaks to global bank capital rules

The European Commission proposed new capital rules for banks on Wednesday in line with those agreed by global regulators but with several tweaks, in a sign of a growing fragmentation of financial rulebooks around the world.
The EU's executive arm proposed adapting its rules on capital requirements and loss-absorbing buffers to agreements reached in the Basel Committee of global financial regulators, which oversees US, European and Japanese lenders.
But instead of simply replicating the rules agreed with its international partners, the Commission proposed changes and some new provisions that may upset non-EU banks and regulators.
After the 2007-2008 financial crisis, governments of major economies pledged to keep their banking rules closely harmonised.
But that close alignment is starting to fray, with the EU trying to reduce the impact of the rules on economic growth and the region's beleaguered banking industry.
"We have put forward new risk reduction proposals that build on the agreed global standards while taking into account the specificities of the European banking sector," said Valdis Dombrovskis, the EU commissioner on financial services.
The move comes as the European Union is battling a new set of reforms expected to be adopted by the Basel Committee in the coming weeks on banks' models for calculating risk, which the EU thinks may favour US banks.
On Wednesday the European Parliament voted against the draft Basel proposals, adding their weight to concerns raised by France, Germany and the European Commission.
In another sign of the fragmentation of global financial regulation, US President-elect Donald Trump has talked about possibly reviewing rules introduced after the financial crisis.
"We expect our international partners to stick to globally-agreed standards," Dombrovskis told reporters when asked about the Trump's intentions.
And in what could be an area of disagreement between the EU and other major economies, Brussels is proposing top US or Asian banks to reorganise their operations in Europe to be better overseen by EU watchdogs - a move that is expected to increase financial stability but also costs for lenders.
"The problems are that this new rule is inflexible, and looks like an aggressive reaction to developments in the US, at a moment when greater regulatory co-operation and convergence are seen as critically important in the market," said James Perry, financial regulation partner at law firm Ashurst.