Indeed, the Commission’s proposal allows for a faithful implementation of the final Basel 3 standards, as agreed at the international level, while taking into account EU specificities and avoiding material increase in capital requirements. As negociations are underway, at the ACPR we see merits in sticking to the following: First, the implementation of the Output floor at the European consolidated level, consistently with the Banking Union which is now almost complete. Second, that the few targeted  adjustments, on critical and strategic exposures for the financing of the EU economy which are transitional in nature, remain so. This concerns both the low-risk exposures on residential real estate and the exposures to unrated corporates. The transitional period is planned to end on 31 December 2032, which will give sufficient time for European banks to absorb the impact of the output floor, through organic capital generation, and for the market to ensure a larger coverage of ratings for EU companies. Another pragmatic measure proposed by the Commission that we strongly support at the ACPR is the introduction of a mechanism that would allow the Commission to adjust rapidly in reaction to international developments on the calendar or the content of key elements of the standard, in particular for market risk activities. This would provide some necessary flexibility for these activities exposed to international competition, as Europe continues to be a front-runner regarding the transposition of the final Basel 3 standards.
Among these are: •  The transition from a long period of exceptionally low short-term nominal and real interest rates in the major economies and in many emerging market economies as well. Real  short-term interest rates in much of the world, as in the United States, are still some distance below the band of estimates of equilibrium. •  The approaching demographic pressures on fiscal resources, which will hit most major economies at a time when underlying fiscal positions are still likely to be in substantial deficit. •  The inevitable evolution in the exchange rate regimes of China, and the substantial number of countries that have been actively targeting their nominal exchange rate against the dollar, to a system where there is more variability in their bilateral and real effective exchange rates. •  The disposition of the global imbalances reflected most conspicuously in the U.S. current account deficit. These are all types of disequilibria. They can be sustained for a time, but not indefinitely. They could be diffused gradually and smoothly. But the transitions to a more sustainable equilibrium could also bring a risk of greater volatility in asset prices, less stability in macroeconomic outcomes, and more uncertainty. This could mean a less benign future environment for U.S. monetary policy. The potential uncertainties posed by these challenges may be more troubling because of confidence engendered by the stability and resilience of the U.S. economy over the past decade.