The head of Europe’s top banking regulator has raised the bar for lenders’ capital requirements, insisting that the 9 percent capital ratio they had to hit as a “temporary buffer” by June is to become permanent.
Andrea Enria, chairman of the European Banking Authority , said “capital conservation” was his priority, with the euro zone crisis persisting and the six-year phase-in of Basel III global capital standards set to begin next year.
He was speaking after last week’s EBA announcement that 27 European banks had boosted capital by a combined 94 billion euros ($115 billion) to reach what it described last autumn as a “temporary” requirement for European banks to hold core tier one capital equivalent to at least 9 percent of risk-weighted assets.
“The key thing will be capital conservation,” Mr. Enria told the Financial Times. “We don’t want the capital to be released. We want the banks maintaining this capital level and gradually moving to the Basel III full implementation. We will be asking the banks to develop capital plans to get there.”
Basel III capital ratios rely on a tougher definition than current rules dictate, limiting the instruments that count as “core tier one capital”.
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