“Basel must not penalise trade” - Sharon Bowles MEP

Liberal Democrat MEP Sharon Bowles, who chairs the European Parliament's Economic and Monetary Affairs Committee, today called on the Basel committee on banking supervision to recognise the significant steps taken this week in the EU to alleviate the regulatory burden for trade finance, an issue Ms Bowles championed during negotiations.

The EU move will hold down costs making trade finance more available and affordable to importers and exporters. Ms Bowles also promoted the exemption from the CVA charge (a risk premium for uncleared derivatives) for global corporates pending further calibration.

Speaking from Strasbourg today, Ms Bowles said:

"On trade finance Europe has now led the world. With growth scarce it is the wrong time to treat trade unfavourably and so the EU has recognised the lower risk of short term trade finance loans that are underpinned by the traded goods and services.

"Similarly, we have taken the progressive line of exempting all, not just EU, corporate hedging from excessive CVA charges, at least until better calibration is done.

"The whole area of CVA is at best incomplete and at worst ill-conceived for the EU, developing countries and anywhere else that, in contrast to the US, does not have active CDS markets for corporates in which to hedge the CVA charge.

"This too is an issue that hits trade in the real economy. Counterparty credit risk needs to be covered but I question whether one model fits all will work when markets differ."

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