European banks: a new realism

European banks may win more time to meet tough new rules that were set for them last year.

News of this likely development is emerging gradually, as  France and Germany also push for an easing of the rules , which were set by the Basel Committee on Banking Supervision.

Worries over the capacity of some European banks to meet those requirements have been unsettling world financial markets.

Many investors fear the new rules might also place too much weight on the European governments,  which back those banks, at a time of serious worries about sovereign debt in several European countries.

French and German negotiators have been pressing for a softly softly approach, at a meeting of regulators in Basel this week.

Increasingly. their arguments are being seen as realistic.

Investors, particularly, are eager to avoid a second fall in world markets, like that which followed the collapse of Lehman Brothers.

Bloomberg says European regulators may now be willing to compromise on how the capital that banks are required to keep is defined.

European banks may also be given a transition period of up to 10 years, to meet the new rules.

Whatever happens, there will be costs associated with these talks, which will continue in Basel this week.

One is that that  the banks involved might be forced to  cut their lending.

That could well have  serious knock-on effects, slowing recovery from the global economic crisis in several European countries and – of course – in the world as a whole.

However the negotiators, now in Basel, now have an urgent example, in front of them.

They have seen worries over debt problems in Greece unsettled  world financial markets.

So they now realise just how fragile the world’s recovery from the global economic crisis really is.

That has been a sobering observation.