LOBBYING by banks to water down agreed capital rules simply diverts them and their regulators from dealing with the day-to-day and emerging risks they face, a global banking watchdog said on Friday (Feb 23).
The Basel Committee of banking regulators from across the world is facing pushback from banks in the United States in particular on the final leg of its ‘Basel III’ post-financial crisis bank capital reforms to prevent taxpayer bailouts of struggling lenders.
“Regulators are often accused of fighting the last war,” Basel Committee chair Pablo Hernandez de Cos, told a conference in Belgium.
“Yet in the case of implementing Basel III, it is the dragging on of the process – with attempts to reopen past reforms and battles – that will divert important resources from banks and supervisors to deal with current and emerging risks instead,” said de Cos, who is also Bank of Spain governor.
“In total, it will be 20 years since the Great Financial Crisis by the time the last element of the outstanding Basel III standards is expected to be implemented in 2028.”
US banks argue that the “end game” Basel rules will be so burdensome that they will dent lending to the economy. Lenders in the European Union have also obtained temporary waivers from some of the rules as UK lenders also ask for some relief.
But De Cos said discussions around Basel III are often “dominated by somewhat flimsy assertions”.
Basel is already turning to tackling new risks, such as the social-media fuelled runs witnessed during the banking turmoil that began in the US in March last year.
“This is why the Committee will publish a report in the coming months on the bank and supervisory implications of the digitalisation of banking,” he said.
Significant growth in non-bank financial intermediation (NBFI), now nearly half of total global financial assets, is being scrutinised for links to banking.
“Against this backdrop, the Committee will be consulting on updated supervisory guidance with regard to NBFI risk management over the course of this year,” de Cos said. REUTERS
