November 17, 2015 / 12:41 PM / 4 years ago

UPDATE 1-New banking rules should not increase capital demands - ECB

* Lautenschlager speaks in Frankfurt

* Basel III rules should not further push up cap requirements

* Large euro zone banks asked to hold CET1 of 10.1 pct on avg

* Current Pillar 2 requirement “generally adequate” (Adds detail, quotes, contest)

By Francesco Canepa

FRANKFURT, Nov 17 (Reuters) - New global rules on banking due to be completed next year generally should not result in higher capital demands for euro zone banks, European Central Bank Executive Board member Sabine Lautenschlager said on Tuesday.

Lautenschlager is a member of a Swiss-based committee in charge of shaping the Basel III regulatory framework, including how much capital banks need to set aside to absorb possible losses.

“We should, whatever comes out of Basel III, stay with the overall capital levels as we are now,” Lautenschlager told a business conference on Tuesday. “That does not mean that for single banks there won’t be some changes.”

Lautenschlager expects the Basel committee to finish its new rules, which are due to take full effect in 2019, by the end of next year. She dismissed the notion, put forward by some in the banking industry, that a whole new wave of regulation called Basel IV was coming.

“We don’t talk about Basel IV,” she said. “That is really far away and nothing that is in discussion.”


Under Basel rules, the ECB is in charge of setting an additional capital buffer for the 122 euro zone banks on its watch. Known as Pillar 2, the requirement has been pushed up slightly for 2016.

Banks and even some within the ECB and euro zone central banks have been complaining about ever-rising capital demands and uncertainty about future requirements.

Including Pillar 2, banks directly supervised by the ECB will be asked to hold a Common Equity Tier 1 capital equal to 10.1 percent of their risk-weighted assets, on average, next year, Lautenschlager said. The current requirement was “generally adequate”, she said.

“From my perspective, the current level of Pillar 2 capital requirements is generally adequate in the sense that I regard it as sufficient to cover the current risk exposures across significant institutions,” she said.

Requirements for individual banks range from 8 percent to about 14 percent, depending on each lender’s balance sheet, Lautenschlager said. She said the requirements take into account each bank’s specific characteristics.

“In order to determine potential capital needs for the future, our capital determination process is rooted in a strong quantitative fundament,” Lautenschlager said. “But at the same time, we apply supervisory judgment, for example when selecting adequate stress testing scenarios.” (Editing by larry King)

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