Basel comes to compromise on capital ratios
GLOBAL regulators reached a compromise on capital ratios for banks that will introduce higher capital requirements over a five-to-10-year period starting in 2013, a German central bank official said.
The Basel Committee on Banking Supervision has drafted key points of the so-called Basel III reforms, Bundesbank vice-president Franz-Christoph Zeitler told reporters in Frankfurt yesterday.
The proposal will be the basis for the September 12 meeting of the Group of Governors of Central Banks and Heads of Banking Supervision Authorities, who will decide on the reform framework.
'Die Zeit' newspaper reported on September 6 that the Basel Committee met to discuss a proposal demanding a minimum capital ratio for financial institutions of 6pc as well as a "conservation buffer" of 3pc for bad times.
The proposal would have required an additional "anti-cyclical capital buffer" of 3pc during "boom times," the newspaper said.
"The committee has found a compromise on the level of capital ratios," Mr Zeitler said, but he didn't reveal any numbers.
The Basel Committee is preparing banking rules for G20 leaders who are scheduled to adopt them in Seoul in November. The Basel III reforms aim to make banks more resilient in the light of the experiences during the financial crisis.
European Central Bank Governing Council member Axel Weber yesterday said higher capital requirements for banks won't curb economic growth.
"Recent studies, based on a comprehensive cost-benefit analysis, show the path we walk isn't too risky. Therefore, we don't have to expect that the planned increase in capital ratios will hamper the real economy, in particular given generous transition periods."
Mr Weber, president of Germany's Bundesbank, said he is "confident" that the proposals will be concluded this weekend, and that he wants the US to follow through on implementation. (© Bloomberg)