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LONDON: The European Union only scraped through a test of whether it complies with global banking rules aimed at making the financial system safer and avoiding another global markets meltdown.

The United States fared better in complying with bank capital rules know as Basel III which constitute the world's core regulatory response to the 2007-09 financial crisis that saw under-capitalised lenders being rescued by taxpayers.

The global regulators who wrote the rules marked Europe down over its lighter capital treatment on banks holding government debt, a sensitive issue in a region where several countries had to be bailed out.

The Basel Committee said its review of how the EU and United States, which account for most global banking assets, apply the rules found several instances where both fell short.

The committee, made up of supervisors and central bankers from nearly 30 countries, graded the 28-country bloc as "materially non-compliant", the lowest grade above a fail.

The United States was deemed to be "largely compliant".

Beyond Friday's "naming and shaming", Basel has no powers to enforce its rules or sanction rule busters.

Europe was braced for criticism from the Basel Committee. But lawmakers from the European Parliament, which approved EU rules comprising an amended version of Basel III, said the changes made in Europe were aimed at helping banks to finance the economy.

"The opinion of a body that is working without legitimacy and without any transparency cannot modify the decisions taken democratically by the European institutions," a cross-party group of lawmakers said in a joint statement.

Basel said eight of the 14 components of Basel III it studied in Europe met all minimum provisions and were compliant, while a further four elements were largely compliant.

Originally posted here:
European Union barely passes global bank rules test while its US counterparts fare better