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Basel III meeting on global banking reforms delayed

The oversight body of the Basel Committee on Banking Supervision has postponed a meeting due to be held next week, saying it needs more time to reach agreement on some aspects of the revised Basel III banking regulatory framework.05 Jan 2017

Basel III is a global, voluntary regulatory framework on bank capital adequacy, stress testing and market liquidity risk. It aims to strengthen bank resilience by increasing bank liquidity and decreasing bank leverage.

The Group of Governors and Heads of Supervision (GHOS) said it was postponing its meeting to allow additional time to forge an agreement.

"More time is needed to finalise some work, including ensuring the framework's final calibration, before the GHOS can review the package of proposals," it said.

Mario Draghi, chairman of the GHOS, said: "Completing Basel III is an important step towards restoring confidence in banks' risk-weighted capital ratios, and we remain committed to that goal."

No new date has been published for the postponed meeting.

The Basel Committee brings together regulators from around 30 countries to coordinate rules for their banks. Its members include the Bank of England, US Federal Reserve, European Central Bank and the China Banking Regulatory Commission.  

The Basel Committee issued revised minimum capital requirements in January. Under these, global banks will need to increase the amount of capital held against their trading books by the start of 2019, but by less than had been expected.

Banking associations from Europe, Japan and Canada wrote to the Basel Committee in September saying that its plans would force them to cut lending.

In a letter seen by the Financial Times, the European Banking Federation, the Japanese Bankers Association and the Canadian Bankers Association say that the proposed rules would "significantly increase capital requirements" and in turn reduce their ability to lend money.

The banking associations are concerned about plans to limit how far a bank can use internal risk models to decrease its capital requirements.

Banking reform expert Tony Anderson of Pinsent Masons, the law firm behind, said: "While any delay in agreeing a revised Basel III framework will be welcomed by banks, it will only be short term. The significant political and economic changes to be experienced this year, including the new US administration, a series of European elections and the triggering of Article 50 in the UK, will only serve to concertina the revisions required to bank business model".

"There will be a keen focus on the attitude of the US when the revisions are agreed to see if there is a divergence from the position taken by the previous administration. This will particularly be around how output floors could limit the extent to which individual banks can use their own modelling to measure lending risk," Anderson said.