The European Union (EU) unveiled plans to raise capital requirements for banks. This measure is part of a reform of the Capital Requirement Directive.
Under the new rules, banks will face stricter requirements on the capital they must hold to support their operations. The proposed measures, which still have to be accepted by the European Parliament, include the following:
- Banks selling securitised products, such as mortgage-backed securities, will have to retain some of their risk on their balance sheet (5 percent).
- Inter-bank exposures will be capped at 25 percent of their own funds or below 15 million Euros.
- Colleges of supervisors will be set up to look over all banking groups with cross-national operations.
UNI Finance has been calling for higher capital requirements since the beginning of the financial crisis. This measure is part of UNI Finance's demands on financial regulation. However, efforts should not stop there. Tougher regulation of financial institutions is needed in areas such as transparency, executive pay systems, hedge funds and private equity funds, consumer protection, and sales targets.
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