Oggi e domani a Basilea si discute dei Capital Requirements
Basel Accord Negotiators Likely to Dilute Proposals
By DAMIAN PALETTA And DAVID ENRICH
Bank regulators and central bankers gathered in the Swiss city of Basel this week for two days of closed-door meetings are poised to dilute proposals floated in December, after intense lobbying from big banks and some governments, so they can reach a global compromise by a November deadline.
Amid wide agreement that banks need to hold bigger capital cushions than they did before the global financial crisis so they can absorb big losses, this week's talks are focused on resolving several key disputes:
What counts as capital? How much should banks be permitted to borrow? How much ready cash should they hold? How flexible should rules be to different national banking systems? How long should banks have to comply with the stiffer standards to avoid an unwelcome credit crunch?
An accord at the Basel Committee on Banking Supervision will have a more global and, in some instances, more potent impact on bank profits, lending and investing than the sweeping financial regulatory bill that the U.S. Congress is expected to pass this week.
"There is all the stuff in the [U.S.] financial reform bill, but this is more important in terms of the direct cost for banks," said Hal Scott, a financial-regulatory scholar at Harvard Law School.
The talks, which conclude Thursday, bring to the table 44 agencies from 27 countries, each with their own priorities. The French are demanding changes that would allow their three largest banks—
Société Générale SA,
Crédit Agricole SA and
BNP Paribas SA.—to continue owning insurance subsidiaries without penalty. The Germans and French want banks' minority investments in other institutions to count toward capital standards.
The Japanese have raised concerns about no longer counting deferred tax assets as capital. U.S. officials want U.S. banks, such as
Bank of America Corp. and
J.P. Morgan Chase & Co. to continue to be allowed to count mortgage-securitization rights as capital..
Among the major flashpoints is the design of a limit on how much banks can borrow—a "leverage ratio." Negotiators from several countries, including Germany, which is worried about the impact on
Deutsche Bank AG, want regulators to be given discretion over how rigidly to enforce the new ratio, rather than having binding global rules. Others say that would undermine the intent of the rule. Officials have said they would begin with an "observation period" for the leverage ratio, and there is now a disagreement over what to do after that.
Progress this week in Basel is essential to move toward an agreement in time for G20 leaders to celebrate when they gather in Korea in November. To reach that end, there's talk among participants and bankers about shelving some contentious issues, an approach that has been dubbed informally "if in doubt, take it out" by insiders. Other provisions may be moved from a must-do section, known as Pillar 1, to Pillar 2, items on which national regulators have more discretion.
The delicate economic landscape in Europe has added complications, amid worries that too-stringent rules will mean less credit. "I think there's a growing feeling among finance ministers that…growth is anemic. Do you really want to threaten a fragile recovery?" Stephen Green, chairman of HSBC Holdings PLC, said in an interview. "I think this will end up in a sensible way."
To reduce resistance to the rules and ease the impact, regulators are moving toward allowing banks to "grandfather" portions of existing capital that wouldn't count under new rules and to insulate banks from having to replace certain types of capital. They are also likely to allow between five and 10 years to comply with the new capital rules, according to those close to the talks.
Bankers, and some governments, warn that forcing banks to be overly cautious in an effort to avoid another global meltdown could produce a persistent credit crunch and weaken an already fragile economy. But significant moves by the Basel Committee to back away from its initial proposals to win global agreement will provoke criticism that regulators are caving to industry pressure and missing a chance to impose restraints that could reduce the risk of future costly crises.
The Basel Committee, chaired by Dutch central banker Nout Wellink, sets standards that national regulators are encouraged to adopt. It meets in the 19-story cylindrical office tower that houses the Bank for International Settlements, a consortium of the world's central banks. The global financial crisis exposed flaws in bank capital standards issued in 2004 that the new accord, Basel III, is supposed to rectify.
Delegates at this week's meetings discussed studies by Basel staff and others that estimated the likely impact of the proposed rules. They show that the version outlined in December could require banks world-wide to raise nearly $1 trillion in new capital, according to people briefed on the process. That's considerably less than the multitrillion-dollar estimates published by some industry groups, but enormous nonetheless.
One sticking point is whether to implement what is known as a "net stable funding ratio," which would require banks to hold more long-term funding in an effort to make them less susceptible to freezes in the funding markets. This proposal has proven highly contentious, amid complaints from some analysts it could cost banks trillions of dollars in new funds. The idea could be shelved, people familiar with the matter said.
Another issue is a requirement that banks be required to hold more than the minimum capital requirement in good times to assure that they can weather bad times. Regulators are at odds over what the penalty should be for banks that dip below that buffer, and whether they should limit executive compensation or dividend payments for banks that fail to maintain the buffer.
People familiar with the matter have said that France and Germany fear they will be bound by the European Commission to implement them. And d Disagreements are fueling speculation that governments may balk at the accord, a notion fueled last week
Michel Pebereau, chairman of BNP Paribas. "I think it would be better to have good, adapted regulation in Europe than to try to have a global regulation in which Europe will not be able to have growth in the future.e," he said.
Some Europeans, recalling that the U.S. never fully implemented Basel II, suspect the U.S. may back out at the last minute. "Will Basel III be implemented by the U.S. and by the world?" the European Commission's Pierre Delsaux asked at a bankers' conference on Tuesday in London. "That's a fundamental question for us."
U.S. Treasury Secretary Timothy Geithner has emphasized that thicker capital cushions are the best way to avoid taxpayer-financed bailouts.
Negotiating Basel II took more than a decade, but this time the elected leaders of the world's major countries are engaged. "Perhaps for the first time in many decades, the actual elected leaders of countries are talking about this stuff at a real fine-grain level," said David Andrew Singer, a Massachusetts Institute of Technology political scientist who has written about international financial standards. That may intensify pressure to set aside controversial provisions to reach agreement on the rest.
—David Gauthier-Villars, Marcus Walker and Atsuko Fukase contributed to this article.
Write to Damian Paletta at
[email protected] and David Enrich at
[email protected]
Basel Accord Likely Means Weaker Regulations - WSJ.com
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