EU banks watchdog says bad loan rule to have moderate capital hit

LONDON: European Union proposals that would force banks to set aside more capital to help stop the build up of bad loans will only have a modest impact on overall capital requirements, the bloc's banking watchdog said on Wednesday.

The European Banking Authority (EBA) published an opinion on EU plans for a "prudential backstop". The plans are due to be published by the European Commission later on Wednesday.

The cumulative impact of the new rule over a seven-year horizon, seen as the maximum amount of time for banks to adjust to it, would amount to 56 basis points or 10 percent of retained earnings, EBA said.