Stricter rules defined by the Basel Committee on Banking Supervision (BCBS) will have an impact on the financial and economic sector, the Belgian Financial Sector Federation (FEBELFIN) which represents 270 members, warned on Friday.
FEBELFIN fears strict implementation of the new Basel III standards, which will take effect from 2023, will make loans more expensive for consumers.
The BCBS is the primary global standard setter for the prudential regulation of banks. Its reforms, known as the Basel standards, were initiated in response to the global economic crisis in 2008 with the aim of making banks more resistant to any future crises.
The first phase of the reforms focused on strengthening capital and liquidity cushions, while the latest elements of the reform package deal mainly with bank risk management.
The European Commission is scheduled to publish a proposed bill for the implementation of the final Basel III standards in August 2021.
FEBELFIN is worried that the increase in the cost of credit could lead to reduced demand for loans and less investment.
It notes that stricter equity requirements will translate into higher costs since these are a more expensive source of financing than debts. It is therefore essential to limit these requirements to avoid penalising the financing of the public sector and of companies not quoted on the stock exchange, the Federation said.
For FEBELFIN, a balance needs to be struck between capital requirements and financing the economy. The federation pointed to a study commissioned by the European Banking Federation which shows that the final Basel III standards stand to increase European banks’ equity requirement by an additional 170 billion to 230 billion euros.
Belgian banks have made efforts in recent years to reinforce their resilience and build a consistent equity cushion while putting internal risk calculation models in place, the Federation said.
It also stressed that it was important for banks to maintain optimum financing capacity so as to help small and medium-sized businesses given the difficulties they have experienced during the novel Coronavirus pandemic.