Global regulators ease bank rules, grant four extra years
(08 January 2013 – Global) Global regulators have allowed banks four extra years and greater flexibility to build up cash buffers so they can use some of their reserves to help struggling economies grow.
An earlier draft of new global bank liquidity rules to help prevent further financial crisis has been amended, as banks complained they could not meet the January 2015 deadline to comply with the new rule on minimum holdings of easily sellable assets from the Basel Committee of banking supervisors.
The Basel Committee’s oversight body agreed on Sunday to phase in the rule from 2015 over four years.
It also agreed to widen the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds.
The new, less liquid assets can only be included at a hefty discount to their value, but the changes are a significant move from the draft version of the rule unveiled two years ago.
The Basel Committee, drawn from nearly 30 countries representing nearly all the world's markets, hopes they will stop banks from shrinking loan books to comply with the rule.
'For the first time in regulatory history, we have a truly global minimum standard for bank liquidity,' the oversight body's chairman Mervyn King told a news conference in Basel, Switzerland.
'Importantly, introducing a phased timetable for the introduction of the liquidity coverage ratio ... will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery,' said King, who is also Bank of England governor.
Banks would start complying in 2015 when they are expected to hold at least 60 percent of the total buffer, building up to 100 per cent by January 2019, when Basel's separate, tougher bank capital requirements also must be met in full.
The Basel Committee’s oversight body agreed on Sunday to phase in the rule from 2015 over four years.
It also agreed to widen the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds.
The new, less liquid assets can only be included at a hefty discount to their value, but the changes are a significant move from the draft version of the rule unveiled two years ago.
The Basel Committee, drawn from nearly 30 countries representing nearly all the world's markets, hopes they will stop banks from shrinking loan books to comply with the rule.
'For the first time in regulatory history, we have a truly global minimum standard for bank liquidity,' the oversight body's chairman Mervyn King told a news conference in Basel, Switzerland.
'Importantly, introducing a phased timetable for the introduction of the liquidity coverage ratio ... will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery,' said King, who is also Bank of England governor.
Banks would start complying in 2015 when they are expected to hold at least 60 percent of the total buffer, building up to 100 per cent by January 2019, when Basel's separate, tougher bank capital requirements also must be met in full.
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