EU finance ministers have adopted a preliminary agreement to sharply boost the amount of capital banks must hold to offset risky trading activities.
EU states and the European Parliament have the final say on the reform. Finance ministers also asked EU president Sweden to start talks with parliament with a view to final adoption of the reform at first reading.
The reform will also prevent bank pay policies 'that generate unacceptable levels of risk', a statement said.
The measure was proposed by the European Commission in July to strengthen the EU's bank capital requirements rules by applying lessons from the worst financial crisis in decades.
It is part of wider, global efforts spearheaded by the G20 group of leading countries to force banks to top up their capital and liquidity levels and lessen the likelihood that huge taxpayer backed bail-outs of banks will be needed in the next crisis.
The reform puts into EU law principles agreed by the global Basel Committee on Banking Supervision which finalised its new rules on trading book capital in July. These are due to take effect from the end of 2010.
Capital requirements on assets held on a bank's trading book currently attract far lower capital than if they were parked on the firm's main book. This resulted in too little capital being held when the credit crunch started unfolding over two years ago.
The Basel Committee estimates that trading book capital will be two to three times higher under the new rules, a shift analysts say will prompt a rethink by some banks as to whether they want to continue trading certain complex or risky assets.
EU finance ministers have adopted a preliminary agreement to sharply boost the amount of capital banks must hold to offset risky trading activities.
EU states and the European Parliament have the final say on the reform. Finance ministers also asked EU president Sweden to start talks with parliament with a view to final adoption of the reform at first reading.
The reform will also prevent bank pay policies 'that generate unacceptable levels of risk', a statement said.
The measure was proposed by the European Commission in July to strengthen the EU's bank capital requirements rules by applying lessons from the worst financial crisis in decades.
It is part of wider, global efforts spearheaded by the G20 group of leading countries to force banks to top up their capital and liquidity levels and lessen the likelihood that huge taxpayer backed bail-outs of banks will be needed in the next crisis.
The reform puts into EU law principles agreed by the global Basel Committee on Banking Supervision which finalised its new rules on trading book capital in July. These are due to take effect from the end of 2010.
Capital requirements on assets held on a bank's trading book currently attract far lower capital than if they were parked on the firm's main book. This resulted in too little capital being held when the credit crunch started unfolding over two years ago.
The Basel Committee estimates that trading book capital will be two to three times higher under the new rules, a shift analysts say will prompt a rethink by some banks as to whether they want to continue trading certain complex or risky assets.
