European Union to Agree on the New Banking Capital Rules

On Friday, the European Union finance ministers are likely to agree to the new banking capital rules in a major step to enhancing the financial stability of EU. However, according to the EU officials, the agreement could be delayed due to the political crisis in Italy.

European Union Flags Outside a Building

The possible delay could be seen as a first sign of how the prolonged crisis of Italy and its evolving Eurosceptic government could slow the already sluggish reform process of the bloc.

Meanwhile, a deal on the banking reform would come after 18 months of heated debates among the 28 EU governments on how to apply new global bank capital rules that renovated financial regulations after the global crisis happened last 2007 to 2009.

Countries have been battling for months now for the level of capital buffers that banks should hold against risk of failure and the powers of the EU agency for troubled banks, the Single Resolution Board, to enforce these capital requirements.

However, the major difficulties have already been cleared and an agreement could be finalized on Friday once the EU finance ministers gather for a regular meeting in Brussels, three European officials stated.

According to the officials, France and Germany are now ready to back up the main elements of a compromise which was forwarded by the Bulgarian presidency of the EU.

The agreement, on the other hand, would give the SRB a clearer mandate in setting the capital buffers of the banks, which is known as Minimum Requirement for own funds and Eligible Liabilities.

Moreover, a deal on the banking package needs a qualified majority of the EU member states and need to be sealed even if Italy resisted it.

However, given the importance of the proposals, the Bulgarian presidency could opt for a postponement of the vote, just like what it did last March at a meeting just to wait for the swearing-in of the new German government.

The decision will be on Friday, whether the deal will be sealed or delayed, after the public debate of the EU finance ministers.

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