Implementing Basel 4 in the EU

We call for more systematic proportionality to reduce the unnecesssary burdens on small, non-complex banks, including most building societies.

As we explained in detail in our April 2018 response, what is most needed now is far more systematic proportionality in the application of Basel-derived rules to small, non-complex banks. As is well known, the Basel Agreements apply formally only to “Basel banks” – large, internationally-active banks. Some jurisdictions only apply Basel rules to a handful of their large banks. But the EU, ostensibly for single market / single rule book reasons, has applied practically the whole of each successive Basel regime to all credit institutions with no, or very little, differentiation even for the smallest and least-complex banks. We recognise and respect the efforts the Commission has so far made to re-introduce proportionality, following on from the 2015 Call for Evidence under the REFIT initiative, and with some limited but important and welcome measures already adopted in the “CRR 2” dossier – such as the legislative recognition of the small, non-complex bank now in Article 4.1 item (145). But without further, explicit action by the Commission now, the default paradigm for Basel 4 implementation will remain application to all EU banks regardless of size or complexity. We regard this approach as fundamentally at variance with the right to proportionality founded in Article 5 of the Treaty on European Union.

Read our full response here.