New global capital rules won’t force Irish banks’ hand, says Mairead McGuinness

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The new global capital rules will have a negligible impact on Irish banks, due to the large liquidity reserves built up since the 2008 financial crisis.

If banks already have a higher capital requirement this should be taken into account, ”said EU Financial Services Chief Mairead McGuinness as she worked to close remaining gaps in the regulation. post-financial crisis.

Analysts say the so-called Basel III rules, which the European Commission wants to introduce gradually from 2025, will largely affect European lenders with large mortgage portfolios.

In three bills released on Wednesday, the EU also proposed several waivers that it said would not hamper bank profitability.

Banks will be faced with a minimum floor on the capital they must hold in the face of future crises, limiting their use of internal calculation models.

There will be additional monitoring of climate risk, fintechs and foreign branches, as well as exit options for unrated companies, low-risk residential mortgages, and loans for industry and “strategic” infrastructure.

EU banks will not have to raise more than 9% additional capital by 2030, when the rules come into full force, the Commission said.

The European Banking Authority had previously estimated an increase of 15.4%, costing banks 9.4 billion euros.

The rules will have a “slight but not significant” effect on Irish banks, said Brian Hayes of the Banking and Payments Federation Ireland (BPFI).

“We have just had a real banking stress test, not an academic test, and the Irish banking sector has held up. If anything, the additional capital requirements will hit other European banks that have a smaller capital base, ”he said.

Previous data from BPFI showed Irish banks held around three times the amount of capital held by their EU counterparts.

Diarmaid Sheridan, research analyst at Davy Stockbrokers, said the Basel rules would be “fully manageable” for Irish banks and the legacy of the latest crisis was starting to fade from their balance sheets.

“We should see, and we have started to see it, that capital requirements in Ireland go down as old mortgages are paid off and in particular as banks sell non-performing loans.”

The EU is the first jurisdiction to implement the rules, which took nearly a decade for the Basel-based Bank for International Settlements (BIS). They will always need the seal of approval from MEPs and finance ministers.

France and Germany have pushed for the rules must be watered down, a move which Central Bank of Ireland governor Gabriel Makhlouf and several EU counterparts have opposed.


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