The members of the European Association of Cooperative banks appreciate that the Basel Committee during its meeting at Santiago de Chile earlier this week has made good progress and the contours of an agreement are now clear. However, with the overall calibration of charges remaining open, concerns remain. Gerhard Hofmann, President of the Association pointed out today:
“The finalization of the agreement is important for global coherence and a global level playing-field. However, the new framework should not only be more sensitive to risk and enhance the stability of banks, but also ensure that banks can fulfil their role in the economy. European cooperative banks are among the primary lenders to private households, SMEs and corporates. In the current situation, any reduction of their lending capacity would be a severe blow for the European economy. We are therefore delighted to hear that the new standardized approach will be neutral in terms of capital impact. We are also glad to hear that internal models will be largely retained. On the other hand, we we remain sceptic about the combination of input floors and a combined output floor to the IRB models and their impact on bank capital. However, we are strongly convinced the European negotiators will take a firm stand on the capital neutrality.”