Europe’s new bank reform plan

Authorities in the European Union plan to change the laws on the banking system, which will raise the capital adequacy requirements for financial companies. Changes will be announced in October, forward FT.
The bill will likely be supported by finance ministers of member countries today. This shows that will have to adjust the rules governing the activities of banks.
According to critics of the current legal gaps in the banks are allowed to act unreasonably. Thus, they have increased the peaks and deep declines in business cycle, which is a painful process for the economy.
The bill recommends changes to accounting and other measures that will make banks’ capital buffers more sustainable in times of crisis.
Finance Minister of Germany will insist to his European colleagues the capital constraints of the banks in the euro area to be lowered to end the crisis in order that they can more easily grant loans to businesses.
Bank lending is crucial to the functioning of the German economy and is a major source of funding in most European countries. The situation in the U.S. and the UK is different because the issue of shares and bonds is a common option to raise funds.
The changes provide more banks can more easily accumulate provisions during good economic times without having to designate funds for specific assets. These funds will be used to meet challenges in times of crisis.
Economic and Finance Minister of Germany are of the opinion that banks in the euro area continue to perform their functions, although the European Central Bank provided their record amount of 442 billion euros on June 24.
They insist to take measures to compel the banks to grant more loans to cover instead of through the gaps in their accounts.
Another important idea that finance ministers will discuss, is limiting the impact of lower capital requirements for credit rating.

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Finance