France has hardened its position against any changes to international banking rules that would result in higher capital ratios, just days before crunch talks.
France’s finance minister, Bruno Le Maire, said on Tuesday that France would oppose any increase in capital requirements for banks. He was speaking just days before policy makers meet at the International Monetary Fund’s meeting in Washington later this week, where it is hoped a longstanding technical disagreement over how banks model for risk can be resolved. The argument is holding up a whole swath of long-awaited reforms intended to stop banks gaming exiting post-crisis rules.
“We do not want any increase in capital requirements; this is the constant position of the French government,” Mr Le Maire said after a meeting of EU finance ministers in Luxembourg. “We will have new discussions in Washington; it will be up to the central banks to build a compromise on that.”
The unequivocal position of France will be greeted with dismay by policy makers. They met last week as the Basel Committee for Banking Supervision, and yet again failed to agree on the so-called output floor, which limits the extent to which banks can use their own models to calculate the riskiness of their lending. Insiders pointed to the fringes of the IMF’s meeting later this week as another opportunity to try to resolve the debate.
Banks have dubbed the wider reform package “Basel IV” — a reference to the post-crisis rules called Basel III that drastically increased their capital — because they fear the reforms will force them to set aside more capital by stealth; something the committee has denied.
The Basel Committee is a group of policy makers from around the world that agrees by consensus global standards for banks that are then implemented locally. Its prominence grew during the financial crisis. But as memories of the crisis fade, politicians have become more concerned about economic growth and job creation.
A person close to the French finance ministry told the Financial Times that France was most concerned that any change to the rules could choke growth and put European banks at a disadvantage to their US rivals.
Transatlantic tensions over the last 18 months around the output floor have threatened to derail the committee’s most recent package of reforms.