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The regulations should not handicap the financing of the economy

Priority should be given to mechanisms for preventing and resolving crises

Since the start of the crisis, French banks have been supporting initiatives to improve the banking and financial system's stability. However, they are concerned about the current tendency to focus on increasing banks' capital requirements as the only solution to all of the problems identified. If this idea was maintained, it would reduce the banks' ability to finance the economy under good conditions.

Ruling out an additional capital charge for systemic institutions

As Basel 3 will already place severe constraints on banks by increasing the solvency ratio, it is vital that there is no additional capital charge for so-called systemic institutions. New measures to increase banks' capital charges would greatly hinder the financing of the European economy and would in no way contribute to preventing or resolving crises, as was recently highlighted in the Lepetit-Dissaux report.

Effective management of systemic risks requires tighter supervision by all participants and the introduction of a European and international crisis prevention and resolution mechanism. In response to the European Commission's consultation on this issue, the FBF stressed that the future European mechanism should notably give the group's supervisor the authority to take quick and effective action to prevent the consequences of a crisis affecting an institution from becoming contagious. French banks believe that, the best way to deal with losses, in addition to reducing capital, would be to convert subordinated or junior debt into capital, as suggested by the Basel Committee in January 2011.

Revising the liquidity ratios

The liquidity ratio parameters adopted by the Basel Committee must also be revised as the current assumptions are largely inappropriate. French banks would like the European Commission to consider this when transposing the Basel recommendations so as not to adversely affect the financing of the European economy. This means making more assets eligible for the liquidity buffer in future European regulations. In any case, it would be premature to transpose these provisions as they stand into European law, as the Basel Committee has provided for an observation period (until 2015 for the short-term ratio and 2018 for the long-term ratio).

Note that the new solvency rules will already have an automatic effect on the financing of the economy, in terms of price and credit volume.


Colette Cova
email : ccova@fbf.fr
Tel : 01 48 00 50 07

Kenza Benqeddi
email : kbenqeddi@fbf.fr
Tel : 01 48 00 50 08

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