Europe sees good news in US Basel II delay

LONDON, October 4 (Global Risk Regulator) – The one-year delay in US plans for implementing the international Basel II bank safety rules is probably good news for large European banks in an immediate sense. But there are doubts about the implications for the Basel II framework long term, European banking industry representatives believe.

The delay means that large international European banks would have a year’s start over their US counterparts in applying the complex, risk-focused bank capital adequacy rules. During that time the Europeans are likely to enjoy lower protective capital charges, and therefore a competitive advantage, over equivalent US banks, European Banking Federation (FBE) sources say.

That’s a view with which many larger US banks concur. The American Bankers Association (ABA) says the delay "risks leaving US institutions at a disadvantage while the rest of the world implements the internationally agreed upon framework".

The Brussels-based FBE represents some 4,500 banks in Europe. The AMA represents a broad spectrum of large and small US banks. The US intends applying Basel II only to its largest banks, estimated by analysts at 20 or so, although these represent the bulk of the nation’s banking assets.

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