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Verbatim report of proceedings
Wednesday, 6 July 2016 - Strasbourg Revised edition

Basel committee's revision of the standardised approach for credit risk (debate)
MPphoto
 

  Bendt Bendtsen (PPE). – Mr President, nine EU countries are members of the Basel Committee on Banking Supervision, but they have limited powers and hold only 15 seats out of the total of 53 seats in the Basel Committee. Nineteen EU countries are not Basel members at all. Therefore I share the concern of my colleagues regarding the expected recommendation of the Basel Committee on capital flows. Mr Ferber said this evening it is good for the US, bad for Europe. I sincerely hope that the Commission will not take into account that ‘one size fits all’. This has never worked for anyone.

New capital flows will lead to a higher cost of capital for banks and mortgage banks heavily involved in low-risk lending. The new capital flows that the Basel Committee recommends will not fit all European banking systems. For example, it fits very poorly in the country I come from, Denmark, where we rely strongly on a system of low-risk mortgage loans. As it is today, banks put capital aside as a buffer against losses. More capital is reserved for riskier activities. Less capital is put aside for less risky lending such as mortgage loans. With the new capital flows, banks would thus have to put more capital aside for the least risky lending activities such as mortgage lending.

Two horrible consequences arise from this. Firstly, consumers will have to pay this bill when the low-risk loans become more expensive, the consumers – ordinary European homeowners and the SMEs relying mainly on mortgage loans. Secondly, it only gives incentives to banks to take more risks, not less, as the bank will be punished proportionately higher on the cost of low-risk loans than on high-risk loans. That is contrary to the objective of the recommendation on capital flows.

Therefore, let me stress that it is important that the EU stay strong and focused and that we do not adopt the Basel rules just for the sake of adopting rules. These capital flows will seriously harm growth and job creation in Europe and pass on the bill to ordinary people. Let us make sure that it does not happen.

 
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