Basel committee release revised framework
(18 January 2016 – Global) The Basel committee released a revised market risk framework last week.
Global banks will now need to increase the amount of high-quality capital against trading books by a mean of 40 percent by the start of 2019, considerably lower than the Basel committee’s original recommendations of 75 percent.
The less aggressive approach by the Basel committee follows it setting "total loss absorbing capacity" (TLAC) levels in late 2015 at the lower end of market expectations in a win for big banks.
The Basel committee said last week that its upcoming review into the risk models used by the world's large banks, including Australia’s biggest banks, would "focus on not significantly increasing overall capital requirements".
Responding to the new guidelines, Australian Bankers' Association chief executive Steven Munchenberg told Fairfax: "There has been a moderation from Basel of what they were saying 12 months ago. This is encouraging. Global regulators seem to have acknowledged the need for the banks to have clarity and certainty, and this is a signal that there is not going to be shocks with capital leaping up.”
"The cumulative effect of ongoing reforms is that regulatory capital is still going up, but this should be able to be met through retained earnings, rather than requiring major capital raisings,” he said.
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