The European Union tightens the rules to strengthen the banking system

The European Union is tightening the screw. The European Parliament and EU Member States agreed on Tuesday June 27 on new, stricter rules imposed on banks in order to avoid a repeat of the 2008 financial crisis. This text was presented in October 2021 by the Commission European. It aims to implement the final terms of a wide range of reforms dubbed “Basel 3” undertaken internationally after the financial crisis.

The new regulations toughen up certain rules for calculating the risks present in banks’ balance sheets, specify minimum capital requirements and aim to reduce regulatory disparities from one institution or one country to another. They will apply from 1 January 2025.

“A major step forward”

Swedish Finance Minister Elisabeth Svantesson, whose country holds the rotating EU Council presidency, welcomed the deal. “This is a major step forward that will allow European banks to continue to operate even in the event of external shocks, crises or disasters”she said in a statement.

The agreement will still have to be formally approved by the European Parliament in a vote in plenary session, and then by the Council of the EU. It comes as the bankruptcy of regional banks in the United States in March, then the failure of Credit Suisse, had raised fears of new financial turbulence and underlined the importance of rigorous regulation. The European Union is the first in the world to implement the final elements of the “Basel 3” reforms.