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BRUSSELS—The head of the Basel Committee on Banking Supervision said Wednesday his organization won't yield to pressures from European lenders to water down proposed new standards which could increase capital requirements.

William Coen, Secretary-General of the Swiss-based standards setter, spoke at the European Parliament on Wednesday and said that the committee would forge ahead with the controversial plans to revise postcrisis capital rules which are still under negotiation.

"We are well on track to complete these reforms by the end of the year," said Mr. Coen. "The weaknesses in the banking sector were transmitted to the rest of the financial system and the real economy…. Nine years after the start of the crisis, the global economy is still recovering from its effects."

Mr. Coen's appearance in Brussels comes as European Union officials and the bloc's biggest lenders have scaled up their warnings about the damage the new bank-safety rules could inflict on the banking sector.

Europe's largest banks have come out saying the reforms, dubbed "Basel IV", would impose costly new burdens on banks' finances and hinder lending at a time when Europe is struggling with growth.

Philippe Bordenave, chief operating officer of France's BNP Paribas SA stressed in September that current proposals would increase the overall level of capital requirements "to an extent that would damage financial stability."

Sylvie Goulard, a French member of the European Parliament, pointed out that the Basel reforms can no longer be detached from politics, given Europe's weak economic situation and the delicate state of its banking sector.

"The mood in the public opinion has changed, and we see it in the American presidential election and we see it in Europe," said Ms. Goulard. "What is at stake is much more than financial stability, it is the stability of our political systems. We need to explain to voters and citizens where the rules are coming from and who is doing what."

Ms. Goulard added that Basel's decisions, even though they bear no legal force, ultimately impact how the banking sector behaves.

While the Basel Committee introduced fresh rules after the 2008 financial crisis that bolstered the amount of capital banks must hold to withstand moments of economic crisis, it has since said tighter rules are required to bolster the framework. The committee said some banks could still be undercapitalized because of the varying methods banks use to calculate capital, also known as "internal models."

To rectify this, the Basel Committee has proposed five different rules since the end of last year that would require banks to use industrywide calculations instead of their own when assessing risk. U.S. regulators argue European banks currently have an advantage because of their freedom to make risk calculations on their own. They say this allows European banks to underestimate their capitals needs.

The plans have provoked fierce reactions on the continent. Germany and France, whose leading lenders include Deutsche Bank and BNP Paribas, have been the most outspoken against the proposed rules.

"It must be clear that this package must be balanced and that it must provide the same level playing field," said German finance minister Wolfgang Schä uble on Tuesday at a meeting of EU finance ministers in Luxembourg. "And that there mustn't be a discrimination of European banks regarding capital requirements," he added.

EU officials and politicians argue the rules would put the region's banks at a disadvantage to U.S. counterparts because, unlike American firms, European banks generally hold mortgage loans on their balance sheets. As a result, they have to offset more capital against those loans.

Mr. Coen firmly denies that there is a trans-Atlantic spat unfolding in the Basel Committee. "Let me point out that this isn't debate between the European Union and the United States" he said. "There are other countries on the Basel Committee. I don't see this as a level playing field issue," he told lawmakers.

EU regulators, including the bloc's financial services chief Valdis Dombrovskis, have spoken out against the plan though, specifically citing the risk of a competitive disadvantage for the EU. The European Commission, the EU's executive arm, has no direct say in the Basel Committee. But it decides how to implement the agreed Basel standards into EU legislation.

--Andrea Thomas in Berlin contributed to this article

Write to Julia-Ambra Verlaine at julia.verlaine@wsj.com

(END) Dow Jones Newswires

October 12, 2016 12:35 ET (16:35 GMT)

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