Claude Wampach probably didn’t fall off his chair. But on , the director in charge of bank supervision at the Financial Sector Supervisory Commission (CSSF) and a member of the Basel Committee on Banking Supervision might have at least twitched. “I am astonished to discover the very gloomy picture that is painted, particularly for the financing of real estate in Luxembourg. The CSSF does not share these views. The impact of the CRR3 regulation, as estimated to date, remains limited at the level of Luxembourg retail banks as a whole. On an individual level, some banks will see their solvency situation improve, while others will experience unfavourable effects, but all in all these will be limited,” says the CSSF director.

“The article in question contains questionable approximations. The calculation of the output floor, implying that from now on, for operations weighted at 150%, a bank must reserve additional capital of 150%*72.5%, is not appropriate. In fact, this calculation is made on average, at the aggregate level and not at the transactional level. The difference is important. So, for Luxembourg’s major retail banks, the output floor is not binding and does not require them to raise additional capital,” he says. “Furthermore, even if it is true that for the European Union, capital requirements are increasing by 7.8% (for a given balance sheet), this does not mean that ‘banks will have to become more selective’. In fact, they already have sufficient capital today, exceeding the regulatory minimums, to support their operations.”

“Let’s admit that there could be a grey cloud for one or other Luxembourg bank that will be forced to reserve surplus capital for its operations. But we need to put this into context, namely the financial turmoil that began in the summer of 2007, with all its attendant human suffering! The Basel rules--in reference to the Basel Committee on Banking Supervision, which are in the process of being implemented through the European regulation known as CRR3--are the political response to the severe financial crisis of 2008, which fortunately left Luxembourg relatively unscathed. However, it should not be forgotten that this was also achieved at the cost of state intervention (and of Luxembourg taxpayers), which enabled Luxembourg subsidiaries of foreign groups caught up in the turmoil to be bailed out. Then, as early as 2011, faced with the public debts that had since grown in Europe, the sovereign debt crisis threatened to disintegrate the eurozone,” says Wampach.

“Some people seem to have a short memory,” he concludes.

This article was originally published in .