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EU to delay core element of Basel bank capital reforms by one year

FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels

By Huw Jones

LONDON (Reuters) -The European Union will delay a core element of global reforms to bank capital rules by one year to January 2026, the bloc's financial services chief said on Tuesday, to ensure a level playing field between EU banks and their U.S. rivals.

Countries are introducing the last batch of a global bank capital accord known as Basel III, rolled out after taxpayers were forced to bail out lenders in the global financial crisis of 2007-09.

EU financial services commissioner Mairead McGuinness, said it was becoming clear the United States would not be able to meet its self-imposed deadline of July 2025 for introducing the rules.

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"In practice, the entry of application of the Basel standards in the U.S. is now highly unlikely to take place before January 1st, 2026, at the earliest," McGuinness told a conference.

"This one-year delay ensures a global level playing field, for those big European banks competing with other global players. It gives us time to see what others are doing," McGuinness said.

EU banks compete with lenders from the United States and elsewhere in offering market activities and related financial services for international companies.

The EU had planned to introduce all of the reforms in January 2025, but will now delay the section on how banks cover markets risks in their trading books, known as the fundamental review of the trading book, or FRTB.

The remaining changes are set for implementation as scheduled, McGuinness said.

"In the EU, we are firmly adhering to our date of January 1st, 2025 for entry into application of the bulk of the Basel standards," she added.

A senior European banking official said delaying the FRTB is "not any big relief" given that the bulk of Basel III is being introduced next January across the bloc.

The Bank of England has said it would roll out the final leg of Basel III from July 2025, but it has yet to issue the final version of its rules as the regulatory calendar has been put on ice pending the July 4 general election.

The STOXX Europe 600 banks index was little changed after the news, up 0.9% on the day at 0945 GMT, in line with broader market gains.

(Additional reporting by Samuel Indyk, editing by Sinead Cruise and Christina Fincher)