UPDATE 2-BIS URGES BASEL REGULATORS TO KEEP NERVE ON BANK CAPITAL RULES
LONDON, Nov 28 Regulators should complete workon their new bank capital rules without diluting them, otherwiseit would be harder to draw a line under the financial crisis, aglobal central banking official said on Monday.
Claudio Borio, head of the monetary and economic departmentat the Bank for International Settlements, a forum for centralbanks, said the balance sheets of some lenders have still notbeen wiped clean of bad loans nearly a decade after thefinancial crisis began.
That crisis prompted world leaders to introduce tougher bankcapital requirements, known as Basel III. Regulators will seekto complete Basel III at a meeting of the 28-country BaselCommittee, which sets the standard for global regulation, onMonday and Tuesday in Chile. (Full Story)
Chile has been an observer on the Basel Committee since 2014and the head of its SBIF banking regulatory body Eric Parradotold reporters in Santiago on Monday that he was hopeful a dealwould be struck this week.
'The spirit is pretty collaborative,' he said. 'We areoptimistic that in these two days an agreement will be reached.'
Remaining elements of Basel III face stiff opposition fromEuropean Union policymakers, who are concerned they will bump upcapital requirements and crimp lending.
'Prudential authorities should complete the financialreforms without delay, notably Basel III,' Borio told a meetingof the EU's European Banking Authority on Monday.
'And in the process, they should not succumb to the pressureto dilute standards and should redouble efforts to repairbalance sheets,' Borio added.
Despite Borio's pleas, the draft proposals originally airedby Basel are widely expected to be rolled back after field testsshowed they would lead to big hikes in capital for some lenders.
Bank of England Governor Mark Carney and the EBA both expectthe remaining Basel rules to be scaled back significantly inparts.
EU financial services chief Valdis Dombrovskis hasthreatened to boycott the rules in the bloc if they increasecapital requirements significantly. That would jeopardise aninternational approach to bank capital rules that was reinforcedafter the financial crisis.
Dombrovskis struck a more conciliatory tone on Monday,saying the EU was entering the talks in Chile with a view toreaching a 'balanced solution'.
Julie Dickson, a senior banking supervisor at the EuropeanCentral Bank, said in Frankfurt on Monday the Basel Committeehad a track record of getting agreement and she was hopeful thatwould happen this time.