European Community Shipowners’ Associations (ECSA) welcomed the agreement on the Basel III rules reached between the European Parliament and the European Council that gives explicit recognition to ship finance.
The new rules will allow banks to apply preferential treatment to shipping portfolios on specialised lending when calculating risk weights and ultimately their capital requirements, says ECSA. As a result, the new law will enable banks to finance at a competitive price.
It’s worth mentioning that the new law will have to be formally approved by the Plenary of the European Parliament and the European Council in the following months.
The agreement is a positive step forward but more needs to be done to restore access of shipping companies to adequate financing in Europe and support the competitiveness of the industry, ECSA noted.
The European Parliament and the European Council have agreed on how to implement the so-called ‘output floor’, limiting banks’ variability of capital levels computed by using internal models, and the appropriate transitional arrangements to allow sufficient time for market players to adapt.
The Parliament and the Council negotiators also agreed to make improvements to the areas of credit risk, market risk and operational risk. In addition, they agreed to provide for additional proportionality in the rules, in particular for small and non-complex institutions.
Furthermore, the agreement includes a harmonised ‘fit and proper’ framework for assessing the suitability of members of the institutions’ management bodies and key function holders.
Similarly, an agreement was reached on rules to safeguard supervisory independence, notably by providing for a minimum cooling-off period for staff and members of governance bodies of competent authorities before they can take up positions in supervised institutions, and a limit on the time in office for the members of the governance bodies.
The European Parliament and the European Council also agreed on a transitional prudential regime for crypto assets and on amendments to enhance banks’ management of ESG risks.
Under the deal, it was decided to harmonise minimum requirements applicable to branches of third-country banks and the supervision of their activities in the European Union.
Sotiris Raptis, ECSA Secretary General said “The strategic role of shipping for Europe’s energy, food and supply chain security must be properly recognised in the conditions for ship finance as well. Supporting industry’s competitiveness is a prerequisite for enhancing Europe’s security and for supporting the continent’s energy transition. The recognition of ship finance under the new European law is a necessary step forward but it is clearly only a starting point.”
