A deal that shows Europe’s uneven playing field in action
THREE weeks ago, George Osborne told other EU finance ministers that he was not prepared to sign up to capital rules that would make him look “like an idiot” due to their huge loopholes for French and German banks.
One week ago, Osborne signed up to those rules.
So while Barclays took a £400m hit from selling off its BlackRock shares due to the FSA’s punitive treatment of the asset in regulations, the bank’s French rivals, many of which own stakes in insurers, will have not have to contend with such inconveniences.
This is precisely the kind of cost that UK banks are referring to when they moan about “an un-level playing field”. Alone, it is hardly crippling, but it is one of many examples.
The rule itself is one of Basel’s less unreasonable ones, if you accept the premise of standardising risk assessment. Letting banks count minority stakes in other firms towards their core capital means the capital is counted twice, by the bank and the firm whose shares it owns. And it can be hard to turn stock into cash quickly.
Osborne’s capitulation shows that defending the City’s long-term competitiveness is low on his list of priorities.