EU to 'neutralise' impact on bank capital from Basel trading rule, EU source says

BRUSSELS, March 18 (Reuters) - The European Union plans to "neutralise" the impact on lenders' capital requirements from a new global banking reform affecting their trading operations, an EU official close to the topic said on Wednesday.

The EU is set to adopt the Fundamental Review of the Trading Book, a key part of the Basel III package devised in the wake of the global financial crisis, from January next year. The EU has already delayed its implementation as it tries to maintain the competitiveness of its lenders in the face of delays in other financial centres. The rules are not yet in place in Britain or the United States.

The FRTB governs capital and reporting requirements relating to banks' trading assets, crucially including how risk should be measured using a standard method or banks' own calculations. It seeks to match banks' capital requirements more closely with the real risks in their trading activity.

European banks have urged the EU to refrain from imposing new burdens that their competitors overseas do not face.

The EU is to introduce a "temporary multiplier" that neutralises the capital impact on banks that might be affected negatively by the FRTB rules, the source said.

The plan formed part of a consultation launched last year, in which the European Commission sought feedback and said the design of a multiplier "should be straightforward, sensitive to risk, and easy to implement, maintain, and supervise".

The Trump administration is seeking to ease regulations on American banks and has been moving closer to proposing a new version of the so-called "Basel endgame" rules dictating how large banks must measure their risk.

That has put pressure on rival jurisdictions wanting to keep their financial institutions competitive.

The Bank of England has delayed the implementation of FRTB until 2028.