Members of the European Parliament’s economic affairs committee (ECON) have opted not to adopt higher-level capital requirements for lending towards the instigation or expansion of fossil fuel projects.
An amendment to incorporate the one-for-one rule was not voted on by the committee, despite it enjoying cross-party support. Instead the ECON members voted through a compromise package which will implement some outstanding elements of the Basel framework.
Among the successful amendments was a measure to adopt higher risk weightings for crypto assets. This follows exactly the same principle as the one-for-one rule proposed for new fossil fuels, in that banks will be required to hold a euro of their own capital for every euro invested in crypto assets.
The decision prompted the civil society group Finance Watch to question why the financing of risky fossil fuel projects deserves less prudent treatment.
“How MEPs could introduce a one-for-one rule for crypto and then not do so for new fossil fuel projects is beyond comprehension,” said secretary general Benoît Lallemand.
Finance Watch has argued that no European bank with sound risk management practices should consider providing finance towards new fossil fuel reserves. Lallemand said the committee had put the interest of banks above the interest of European citizens, and warned that without swift action climate risks will only intensify further.
The amended legislation will go to the full plenary of the European Parliament, where a fresh bid to incorporate the one-for-one rule is likely to be made. EU member states will then negotiate a final deal which will come into effect in 2025.
In yesterday’s vote, ECON MEPs agreed to mandate the European Banking Authority to assess whether a dedicated prudential treatment of fossil fuel exposures would be warranted. This would take place over the next two years,and may lead to a further legislative proposal being put forward by the European Commission.
This page was last updated January 25, 2023
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