EU Says Banks Must Boost Capital or Be Fined

A briefing note issued by the commission said in part, “If institutions breach EU requirements, the proposal will ensure that all supervisors can apply sanctions that are truly dissuasive, but also effective and proportionate. For example, administrative fines of up to 10% of an institution’s annual turnover, or temporary bans on members of the institution’s management body.”

Fines would be levied in instances of unauthorized banking services; failure to comply with liquidity requirements; failure to notify authorities about acquisition of holdings above a certain threshold; failing to meet governance requirements; exceeding exposure limits to other banks; and not adequately reporting data to supervisors.

Barnier plans to make the proposed laws into a “single rulebook” for supervisory consistency, something banks are in favor of. The commission said of the need for such a move, “Higher levels of capital requirements in one member state would also distort competition and encourage regulatory arbitrage.” There will be some flexibility, however, to allow for measures to cope with local conditions such as an overheating property market.