New bank capital rules 'several years away' in practice

By Francesco Guarascio and Huw Jones

BRUSSELS/LONDON (Reuters) - New bank capital rules now being finalised by global regulators will not be implemented for several years, an official responsible for writing them said on Wednesday, seeking to soothe European concerns about their impact on struggling lenders.

The Basel Committee of banking regulators from nearly 30 countries has faced strong opposition from banks and European Union governments who fear the new rules will bump up capital requirements when major lenders like Deutsche Bank and Monte dei Paschi di Siena face investor concerns about their stability.

Basel Committee Secretary General William Coen said there have been no discussions yet on how the new rules would be phased in.

"We hope to publish final revisions early next year, but actual implementation of those rules, we are several years away," Coen told the European Parliament's economic affairs committee.

The new rules are aimed at ending wide variations in how much capital banks set aside to cover risks from loans. They change how capital is set aside to cover loans and operational risks or poor controls and external events.

All of Basel's rules need the backing of the European Parliament and EU states to enter into force across the 28-country bloc.

EU financial services chief Valdis Dombrovskis said the bloc won't introduce the new rules if they increase capital requirements too much.

In a warning shot before a crucial Basel Committee meeting in November, the economic affairs committee plans to vote on a resolution calling for the new rules not to bump up capital requirements significantly.

Some big banks use their own models for calculating capital buffers, but some regulators suspect they are being used to downplay requirements.

Basel is proposing a "floor" on capital requirements, a reform Dombrovskis has said should be scrapped -- an outcome Coen gave no hint of.

Despite the EU's rare and public opposition to Basel reforms, Wednesday's parliamentary hearing was good-natured, with lawmakers citing movies and poems to underline their concerns.

Banks say the proposals will lead to a big hike in capital requirements, but Coen said they should wait to see the final version.

"Things have changed dramatically," Coen said. "Operational risk has changed quite a bit."

Firms which have taken out insurance to cover operational risks may be allowed to deduct payouts from capital requirements.

Basel may also change its mind and allow the use of models for determining regulatory capital for some asset portfolios, Coen added.

Coen said he was "keenly aware" of the need not to increase capital requirements significantly, but added that it has been the EU's choice to apply Basel's rules to all banks and not just large ones like in the United States.

(Reporting by Huw Jones; Editing by Louise Heavens and Keith Weir)

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