- The Basel Committee has reached agreement on the Basel IV package following lengthy and difficult negotiations. It should be acknowledged that Germany's negotiators, in particular, fought long and hard against a compromise that would adversely affect European banks. However, now that a quantitative lower limit (output floor) of 72.5 percent has been set for methods of calculating capital requirements that are based on internal models, the Basel Committee is not fulfilling the objective that it set itself for Europe of not allowing the capital requirements to rise significantly.
German banks are well capitalized and will be able to cope with the higher capital requirements. Nevertheless, it is impossible to rule out a negative impact on lending to companies and retail customers in Europe.
When they transpose the Basel requirements into law, European legislators will have to take account – as they do at present – of the distinctive features of the German and European markets as well as aspects of proportionality. We therefore welcome the European Commission's intention to conduct a comprehensive impact assessment beforehand.
Moreover, European legislators should not begin transposing the requirements into law unless there is clear evidence that the new rules, including the stricter trading book requirements, are being implemented in other major jurisdictions.