On 12 May 2021, the European Banking Authority (EBA) published a speech given by its chairperson, Jose Manuel Campa, entitled The implementation of Basel 3 in the post-COVID 19 setting.
In his speech Mr Campa covers:
- The measures taken in relation to the COVID-19 pandemic. In particular, Mr Campa states that on “the return to normality” the focus should be to allow a proper recognition of the consequences of the pandemic on banks’ lending books and manage the transition towards the recovery phase.
- Basel 3 implementation. In relation to the implementation of the final Basel 3 standard Mr Campa sets out five general principles underlying the main recommendations for the implementation of this reform in the EU. This includes that the reform should come with a recalibration of the existing overall capital requirements in the EU. Member State competent authorities should take due account of the new requirements (including the impact of the output floor) and avoid overlap in objectives between the Pillar 1 rules established by the Basel Committee on Banking Supervision and other measures such as Pillar 2 and the systemic risk buffer.
- What is needed to support the recovery after the COVID-19 pandemic. Mr Campa explains that as the payment moratoria and other public support measures start to expire, banks and borrowers experiencing financial difficulties should proactively work together in finding the most appropriate solutions for their circumstances, done in a respectful way for consumers and businesses. This should include not only financial restructuring, where banks have experience and internal capacity, but also to the extent possible operational restructuring (for SME and corporate loans), aimed at restoring the viability of such borrowers. Mr Campa also adds that Member State regulators and public authorities also need to support banks’ efforts in managing loan restructuring (forbearance) as well as inflows of non-performing loans post COVID-19.