EU mulls plan for systemic bank buffer compromise

Local supervisors would have powers to force banks to hold extra capital on top of globally agreed minimum's, according to a draft compromise from EU president Denmark that would allow Britain to strengthen safeguards for retail lenders. The EU is tightening up rules to make banks safer, in a bid to avoid a repeat of the last financial crisis when taxpayers had to bail out failing lenders.
Denmark is proposing the creation of a new, optional buffer of core, top quality capital of up to 3 percent, called a systemic risk buffer, which would sit on top of the 7 percent minimum buffer set by the global Basel III accord being introduced from 2013. "Each member state may introduce a systemic risk buffer of common equity tier 1 for the banking sector or one or more subsets of the sector," the "package of flexibility" compromise authored by Denmark said.
The bloc's member states and European Parliament are in the middle of approving a draft law that turns Basel III into binding EU rules. The law, however, worries countries like Britain and Sweden that want room to impose higher capital requirements on banks locally when needed. "Following discussions in the (EU) council working group it has become clear that further flexibility is needed," the Danish paper said.