France pushes Europe to delay bank trading capital rules again

France is pressing the European Union for a third delay on new rules that will impose higher capital requirements on banks, arguing the current timeline will put the bloc’s lenders at an unfair disadvantage, according to people familiar with the matter.

The rules, known as Fundamental Review of the Trading Book or FRTB, will force banks to set aside more capital for their trading operations. The European Commission decided earlier this year to postpone the measures until 2027. The UK subsequently announced it is pushing back the relevant rules until 2028.

France, home to lenders with large international trading businesses like BNP Paribas and Société Générale, has now taken up the cause again and begun petitioning for a further postponement or even an outright cancellation of the implementation, according to the people.

Paris says that’s necessary to preserve the competitiveness of Europe’s banks against rivals in the US, where the adoption timeline remains unclear, the people said, asking not to be identified discussing the private matter. French officials are planning to elaborate on their arguments during a call organised this month by the commission with other members of the bloc, the people said.

Similar Concerns

The French are the only ones so far who have petitioned for another delay of FRTB, according to one of the people. Paris believes other countries will eventually express similar concerns, another person said.

A representative for the French economy ministry declined to comment, while a representative for the commission did not respond to a request for comment.

The commission has the power to extend the timeline again without political involvement, since its legislation to introduce the final post-crisis capital reforms included a special carve out to preserve flexibility around the FRTB rules.

It would need to take a decision in principle on a delay early next year, one of the people familiar with the discussions said.

Taking Time

In an interview with Bloomberg earlier this month, Financial Services Commissioner Maria Luis Albuquerque said the commission would “take some time to understand what is happening around us” and could use its delegated powers on FRTB to address potential competitiveness issues.

In its announcement of a delay to the trading book rules earlier this year, the commission stressed that it had already implemented most of the global capital reforms agreed in Basel in 2017.

The statement also indicated philosophical support for the new regime, describing it introducing “more sophisticated risk measurement techniques, allowing for a closer alignment between capital charges and the actual risks banks are facing in their capital markets activities”.

The US is expected to unveil its plans for introducing the capital reforms early next year.