Euro zone banks set for capital rebate as bar is lowered - ECB

Euro zone banks are set for a reduction in their capital requirements as new rules lower the bar for which bonds count towards the mandatory buffer, the European Central Bank's top supervisor said on Thursday.

Addressing the European Parliament in Brussels, Andrea Enria put that saving at 90 basis point of banks' Core Equity Tier 1 (CET1) requirements, which the ECB sets every year for the euro zone's largest banks.

"According to our calculations, the change will generate an average reduction in CET1 requirements of 90 basis points, as banks will be able to rely on lower quality additional Tier 1 and Tier 2 capital, which is now available at favourable conditions," Enria said.

He added the ECB would ensure there is no duplication of capital charges as a result of the Basel III rules, which introduce a minimum capital requirement for large banks that use their own models for calculating risk, or "output floor".

"We could sterilise the purely arithmetic effect of the increase in risk-weighted assets generated by the output floor," Enria said.

But he warned that the effects of the Basel III standards, which have been introduced to avoid a repeat of the 2008 financial crisis, "cannot, and should not, be fully compensated".

(Reporting by Francesco Canepa; Editing by Balazs Koranyi)