| LONDON, July 24
LONDON, July 24 European Union rules forcing
banks to hold a buffer of cash and top quality debt to withstand
market shocks will be delayed by nine months, the bloc's
executive body has proposed.
The so-called liquidity coverage ratio (LCR) is part of a
global deal known as Basel III to beef up banks' resilience so
they do not have to rely on taxpayers again as they did in the
2007-09 financial crisis.
Under Basel, the LCR is being phased in January 2015, but
the European Commission is now proposing a delay until October
that year, the EU executive's proposal seen by Reuters showed.
The EU is writing its own version of the LCR and it has
taken longer than expected.
"The technical complexity of the issues, the need for
stakeholder consultation and to continue discussions with
national experts until June 2014 have prevented earlier
finalisation of this draft," the proposal said.
The commission is due to approve the proposal in September.
The LCR, the first of its kind, is aimed at ensuring banks
can withstand a 30-day market shock unaided.
The commission says it was originally conceived for the
world's top cross-border banks while the EU will apply it to all
the bloc's 8,000 lenders, who vary in size and type.
"Consequently, the Commission proposes a number of
adjustments to the Liquidity Coverage Requirement to reflect
these Union specificities, most notably for certain covered
bonds and securitised assets," the commission paper says.
As expected, banks can have up to 70 percent of their LCR in
the form of covered bonds, though subject to a discount. This is
far higher than what was agreed globally in Basel III.
The commission's proposals allow the inclusion of
securitised debt based on car loans, consumer credit and loans
to smaller companies. Basel only allows the inclusion of small
amounts of securitised debt based on home loans.
(Reporting by Huw Jones; editing by David Clarke)