The Chancellor, George Osborne, has strongly rejected the EU's proposed implementation of the Basel III banking accords. At a televised meeting of European finance ministers, Osborne told his assembled counterparts that:
We are not implementing the Basel agreement, as anyone who will look at this text will be able to tell you. I’m not prepared to go out there and say something that will make me an idiot five minutes later.
The third of the Basel accords, recommendations on banking regulations issued by the Bank for International Settlements in Switzerland, strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. There are a number of flashpoints in the European implementation of these regulations, but one of the biggest is the desire by Britain and Sweden to be able to go further than the European minimum in the regulations they impose on their home banks.
Michel Barnier, the EU commissioner with responsibility for financial services, expressed fears that allowing such a move would imperil the single market, and amounts to "opting out", but Osborne argued that " what I am asking for has come from the European Central Bank". The ECB has recommended stronger capital standards.
I will not be painted as anti-European. It will bolster Michel Barnier’s credibility when he is talking about the single market that we have some common standards.
Osborne always has a hard time dealing with financial matters in Europe, given the City of London's disproportional importance to the common market. That said, it is rare for him to be on the side of more regulation.
The Financial Times reports that:
Under one compromise, Britain and Sweden would have the option to tack on a capital buffer – amounting to 3 per cent of assets adjusted for risk for total bank exposures and 5 per cent of national exposures – without EU approval. . .
There remained, however, little support for Mr Osborne’s call to tighten capital definitions, in line with demands from the ECB and the European Banking Authority.