Policymakers at The European Central Bank (ECB) are considering the pros and cons of publishing details of a study which compares capital requirements for large EU banks and lenders with standards set by their US counterparts.

Findings of the study, which was completed last year, reveal that, if subjected to US standards, the capital requirement for some of the EU’s largest lenders could increase by a double-digit percentage, according to reports.

These findings have been termed ‘sensitive’ by some and have left policymakers divided over whether to share them publicly or not.

Those in favour of publication tend to use the report to counter increasing pressure from the banking sector to soften rules around the Basel III framework on global capital requirements, as reported by the FT.

But other policymakers are reluctant about the publication of the findings as some are based on assumptions which can be challenged by the banking industry. There are also challenges around data confidentiality in the report, making its publication even harder, according to the report.

The banking industry around the globe has been lobbying heavily over the years against the full implementation of the Basel III framework. But some experts have warned that stepping away from the agreement could pave the way for another financial crisis down the line.

Lobby effect

The Basel III framework was introduced in the aftermath of the 2007-2009 crisis, and “aims to strengthen the regulation, supervision and risk management of banks.” It sets the minimum requirements which apply to all internationally active banks.

Their implementation could mean that minimum capital requirements for large EU banks could increase from 8.6% to 12.2%, according to figures given by the FT.

And that’s why the banking sector has been pressurising policymakers into watering down the proposed regulation. And in some countries it seems to have worked.

In September, the US Federal Reserve Board as well as the UK’s Prudential Regulatory Authority (PRA) announced steps to slash the minimum capital requirements for major banks there.

And in the EU, the banks have published their own study arguing that risk benchmarks for banks operating in the block were already 3.1% higher than those in the US, nullifying the need for tougher regulation.

Rob Mason, Director of Regulatory Intelligence at compliant communications specialist Global Relay, believes that strong lobbying by financial firms around the globe seems to have worked, and that politicians are worried about losing favour with a sector that is important for its tax contributions as well as jobs creation.