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FIEC warns against Basel IV draft proposals

Date 17/11/2016
In a letter addressed today to President Juncker, FIEC President Jean-Louis Marchand warns that the ongoing "Basel IV” negotiations might have a serious negative impact on the financing of European infrastructure and real estate assets, by banks.

"We understand that the draft proposals of the Basel Committee on the revision of the standardised approach for credit risk would basically double capital requirements for bank lending to infrastructure projects. This goes against the Investment Plan for Europe’s principle of private long-term investment,” explains Marchand in the letter.

"To be blunt”, says Marchand, "this means that 50% of the projects in the pipeline would never start and that the rest would be financed at much higher rates. At the same time, large construction companies would choose external growth strategies rather than project financing. Considering that the vast majority of the sector is composed of SMEs, most of them working on a regular basis as subcontractors on big projects, the whole profession would be negatively impacted.”

Marchand therefore advocates that the European Commission should request the Basel Committee to adjust its prudential rules in proportion to the scale of the risks of the banks’ exposure to these asset classes… and retain its decision to transpose the final recommendations in the EU according to the outcome of the negotiations.

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