European bank stocks fell across the board Wednesday after the European Commission unveiled plans to tighten capitalisation rules and introduce requirements for U.S. and foreign lenders operating in the EU.
The proposals, which were confirmed by the Commission in Brussels, will largely align European rules with those recommended by the Basel Committee on Banking Supervision and will mean lenders will need to hold a 3% leverage ratio and maintain a defined cushion against short-term funding risks.
"Europe needs a strong and diverse banking sector to finance the economy," Commissioner Valdis Dombroskys said. "We need bank lending for companies to invest, remain competitive and sell into bigger markets and for households to plan ahead. Today, we have put forward new risk reduction proposals that build on the agreed global standards while taking into account the specificities of the European banking sector."
Europe's Stoxx 600 Banks index fell around 1% by 10:30 GMT while the shares of major European banks fell in concert, holding down gains for broader equity indices.
Germany's Commerzbank (CRZBY) was one of the session's biggest decliners, with shares falling 3% in Frankfurt trading to €6.72 each. Deutsche Bank (DB) was another notable decliner, with shares down 1.5% to €14.68. In Switzerland, Credit Suisse (CS) was off 2% to Sfr13.66.
The Commission proposals also included an increased capital buffer requirement, similar to the 'intermediate holding company' rules in the U.S., for foreign banks operating in the EU, potentially meaning banks such as JPMorgan (JPM) , Goldman Sachs (GS) and Bank of America Merrill Lynch (BAC) could be asked to raise cash in order to continue accessing European markets.