The recent banking crisis, triggered by the collapse of Credit Suisse and Silicon Valley Bank and investors’ subsequent loss of confidence in some of the largest EU banks, has shown the importance of strong regulatory frameworks for banks and the consequences of weaker application of the internationally agreed upon rules. U.S. and Swiss authorities had to resort, once again, to forms of bail-out to deal with these failures.
In this open letter, Finance Watch and co-signatories call on EU co-legislators to draw conclusions from these cases for a substantial financial reform agenda and at least reconsider the deviations from the Basel III framework in the ongoing trilogue negotiations on the EU banking prudential package.
The top EU banking supervisors have been sounding the alarm for a while now. Andrea Enria, Chair of the Supervisory Board of the ECB, Luis de Guindos, Vice-President of the ECB and José Manuel Campa, Chair of the EBA signalled the need to ‘stick to our commitments’ on strong rules for strong banks back in November 2022.
We need to heed their advice and remember that Basel III was built on careful consideration, the evidence and the lessons drawn from the 2008 financial crisis. Faithful implementation of the rules is the absolute minimum for financial stability and the EU´s international credibility.
As Thierry Philipponnat, Chief Economist at Finance Watch, puts it:
‘The EU must faithfully implement Basel III – top banking authorities have signalled this for months, and recent turmoil in the sector has increased the urgency. If policymakers don’t step up in these negotiations and properly implement the Basel framework, banks will be saved with public money time and time again.‘