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European banks urge one-year delay for Basel III rules

By Giselda Vagnoni

GUBBIO, Italy (Reuters) - European banks have asked the European Commission to postpone the introduction of tougher global bank capital rules by a year to 2014 after U.S. regulators delayed application of the new requirements.

The new rules, known as Basel III, are the world's regulatory response to the 2007-09 financial crisis and would force banks to triple the amount of basic capital they hold in a bid to avoid future taxpayer bailouts.

The European Banking Federation sent a letter on November 21 to EU Internal Market Commissioner Michel Barnier, formally requesting a delay on the grounds that EU banks would be at a competitive disadvantage if they introduced the new rules before their U.S. counterparts.

"We are now very troubled over the possible repercussions that the most recent statement from the US Authorities may have for the international competitiveness of Europe's banks," the letter, made available to Reuters on Saturday, said.

It said EU banks were facing sweeping regulatory changes including new capital requirements and liquidity buffers, and the creation of a EU supervisory authority.

"All the while, our U.S. competitors will not have matching obligations imposed on them in parallel, or in a foreseeable future," it said, asking for the introduction of the new rules to be delayed to January1, 2014.

European banks have long complained that protracted negotiations on the new rules meant they would not have enough time to start implementing them from next year, as planned.

Now they have stepped up calls for a postponement, arguing the recent U.S. decision to delay application of Basel III risked creating a trend whereby Europe tightens the regulatory noose around its banks while other jurisdictions hold back.

A spokesman for Barnier said the EU would seek a coordinated stance with the United States.

"We will wrap up negotiations in the coming weeks between countries and parliament (on Basel III) and Michel Barnier will seek clarity from the U.S. and work for a coordinated U.S.-EU approach. Basel 3 norms are important for sound and competitive banks in Europe."

When asked about the possibility of a delay, the spokesman said: "The important thing now is to conclude trilogue (talks between commission, EU countries and the European parliament) so that the EU can start applying Basel 3 rules in 2013. In any case, the various norms come into force gradually up until 2019."

The Basel III rules are meant to be phased in from January 2013 but U.S. regulators cast doubt on the timeframe due to a flood of industry comments on the proposals.

"Basel III must be postponed, full stop" said the head of Italy's banking association ABI, Giuseppe Mussari, at a conference in the central Italian town of Gubbio.

"Clearly there is no worldwide agreement, so we wouldn't be starting on a level playing field."

However, the head of Germany's financial regulator warned this week against a staggered or delayed introduction of the rules.

(additional reporting by John O'Donnell in Brussels, writing by Silvia Aloisi, editing by William Hardy)

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