On Thursday, the European Central Bank resisted industry demands for reduced bank capital requirements, claiming that the current rules are necessary for safety and do not limit lending.
To maintain fair competition, European bankers have been urging the European Central Bank (ECB), which oversees over 100 of the largest institutions in the 21-nation euro zone, to follow the U.S. administration’s recent loosening of bank regulations.
“The evidence does not support concerns that adequate capital requirements may undermine banks’ lending or competitiveness,” ECB supervision director Claudia Buch stated.
Strong capital positions are necessary for banks to operate, she said, adding that the increased capital requirements since the financial crisis have not affected banks’ capacity to lend.
Buch stated before a European Parliament committee hearing in Brussels, “There is no indication that bank capital requirements are restricting the supply of credit.”
Lenders have actually been able to maintain a payout ratio of about 50% because they have so much capital headroom, she said.
Buch added that while capital levels shouldn’t be lowered, the number of different buffers may be decreased, and the process of calculating requirements could be made simpler.
