Banks Win Concession on Basel III Rules
Banks have secured a major concession that eases the Basel III capital adequacy regime, with the oversight body the Basel Committee on Banking Supervision (BCBS) agreeing to amend the leverage ratio rules.
The BCBS has issued the full text of Basel III’s leverage ratio framework and disclosure requirements following endorsement at the weekend by its governing body, the Group of Central Bank Governors and Heads of Supervision (GHOS).
A consultative version of the leverage ratio framework and disclosure requirements was published last June 2013. The Committee said that after carefully considering comments received and thoroughly analysing bank data to assess potential impact, it has adopted a package of amendments relating to the leverage ratio’s exposure measure.
The Financial Times said that the announced changes would come as a relief to big investment banks, which had been fretting they would be forced to raise billions in extra capital. The modifications ease the requirements for products such as derivatives and repurchase agreements, which make up large parts of their balance sheets.
The paper quoted a regulatory source, who said the effect of the adjustments could be to raise big global banks’ average leverage ratio from about 3.8% to just over 4%.
The standard, a crucial part of the Basel III banking reform package, does not take effect until 2018, and regulators have not yet set the minimum required ratio. Basel has proposed a 3% minimum, but some national regulators, including the US, want to go further.
Although welcomed by the industry, the concessions do not go as far as some bankers would have liked. In particular, banks will still have to hold capital against safe assets in their liquidity buffers.
These technical modifications to the June 2013 proposals announced by the BCBS relate to: