AFP, Reuters/Brussels/London

European banks have asked EU Internal Market Commissioner Michel Barnier and other European Union leaders to postpone Basel III regulations aimed at strengthening the financial sector in view of a similar US decision which the banks say would put them at a disadvantage.

“I ask the participants to take into account the problem of an unlevel playing field created by this US decision,” said Christian Clausen, head of the European Banking Federation (EBF), in a letter to Barnier

Clausen called for the authorities to decide on the final package for the European Union “accordingly by considering the postponement of the entry into force of the CRR/CRD IV until 1 January 2014.”

He referred to an EU directive detailing implementation measures of what are known as the Basel III regulations which were drawn up to make banks better able to withstand financial shocks.

The EBF letter was addressed to the EU Commission, but similar ones were also to be sent to the European Council and the European Parliament, the three poles of EU power which aim to begin implementing Basel III regulations on January 1.

The regulations were drafted in the wake of the 2007-2009 global financial crisis, and require financial institutions in particular to hold larger amounts of liquid reserves as a buffer against future crises.

In theory, the rules are to be progressively implemented by banks worldwide beginning in January, but US authorities said on November 9 that they were postponing application there indefinitely.

“I urge you to consider the possibility to mirror the US Authorities’ understanding for the practical implications of compliance of the new rules by setting a realistic entry into force date of the new obligations for Europe’s banks,” Clausen wrote.

When it announced the US position, the US Federal Reserve pointed to a Basel III regulatory capital rule and underscored concern by the US financial sector that it would not have “sufficient time to understand the rule or to make necessary systems changes” by January 1.

Clausen said: “We are now very troubled over the possible repercussions that the most recent statement from the US Authorities may have for the international competitiveness of Europe’s banks.”

While European banks could soon face constraints with respect to their capital requirements, liquidity buffers, leverage ratios, resolution regimes and structural changes that would split off wholesale banking activities, “our US competitors will not have matching obligations imposed on them in parallel, or in a foreseeable future,” the EBF head explained.

Barnier, meanwhile, called on the bloc’s finance ministers to dispel doubts about their “political will” to create a single bank supervisor, the Financial Times reported yesterday.

In an interview with the newspaper, the commissioner also expressed support for a cap on bankers’ bonuses, criticised a voting system favoured by the United Kingdom and suggested EU law could eventually be changed to strengthen the banking union.

Ahead of a meeting of European finance ministers next week, which will test the likelihood of a deal on banking union being struck by the end of the year, Barnier emphasised the importance of reassuring the “fragile” markets.

“Now is the time to decide,” the commissioner said. “We need to meet a deadline set by the heads of state. We need a political decision and that is possible.”

Some negotiators involved in talks over a proposed banking union, which have stalled in recent weeks, expect the year-end deadline to be missed.

“The markets are not complacent. They remain vigilant and watchful. ... We need to deliver now.”

Barnier also offered a solution to the thorny issue of bankers’ pay, suggesting a “maximum cap” which could be adjusted, within a set range, by shareholders.

“Banks need to pay attention. They are part of society, they are not outside of society,” he said.

The French commissioner opposed UK demands for a so-called “double majority” at the European Banking Authority - whereby there must be a minimum of non-banking union votes in any decision - on the grounds it could lead to “fragmentation”.

“The EBA is a body that works for the coherence of the single market. ... A double majority could indeed establish a fragmentation,” he said. “We can work on better systems than double majority.”