Business

EU agrees strict new bank rules

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Media captionMargrethe Vestager, Danish minister for economics: "Healthy and regulated financial sector is important"

The European Union has agreed strict new rules for banks, intended to make them safer and eliminate the need for future bailouts.

All EU banks will have to hold more "top-quality capital", broadly meeting new international standards, the 27 nations of the EU unanimously agreed .

Under pressure from the UK, EU states can impose even stricter capital requirements on top of the new rules.

The new rules will now go before the European Parliament.

It is expected the new regulations will come into force in June.

The agreement comes as there is lingering uncertainty over the euro, with fears that Spain and Italy could need bailouts and Greece may exit altogether.

"Our overall objective remains to strengthen the resilience of the banking sector in the EU while ensuring that banks continue to finance economic activity and growth," said EU Internal Markets Commissioner Michel Barnier.

"The final compromise must contribute to financial stability, the necessary basis for growth and employment."

Basel III

The new rules meet the standards set by Basel III , agreed by the G20 group of wealthiest nations, that strengthen the regulation and supervision of the global banking sector.

When the new EU rules are passed, banks will have to hold more of the least-risky Tier 1 capital - 4.5% compared to 2% under current rules.

Two new capital buffers will be introduced, including one designed to avoid "excessive lending".

On top of these, each member state may impose another capital buffer, depending on approval from the European Commission.

Speaking before the decision, UK Chancellor George Osborne said "uncertainty is undermining the entire European recovery".

"And I think we're reaching a point where we've got to make a decision to see the eurozone stand behind their currency.

"A very important part of that, of course, is strengthening the entire European banking system. And that is what we intend to do today."