Global bank regulators close to Basel deal

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Europe

Global regulators are close to reaching an agreement on new banking rules designed to avoid a repeat of the 2008 financial crisis, the German central bank’s representative at the talks said on Wednesday.

Andreas Dombret’s comments confirm a Reuters report on Tuesday that a decade-long effort to finalize the Basel III rules, aimed at making banks more resilient to financial shocks after a string of bailouts, is nearing its end.

“We, the Basel Committee...currently work on the final piece to complete global regulatory reforms after the financial crisis ...and we are close to an agreement,” Dombret, a director at the Bundesbank, told an audience in New York.

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The struggle to finalize Basel III is a symptom of regulatory fatigue that has set in as governments, wary of burdening banks with ever more stringent capital requirements, focus increasingly on economic growth.

Further discussions on the Basel package are expected to take place in Washington when global central bankers gather this week for the International Monetary Fund’s annual meeting.

The last big stumbling block in the talks is a measure that restricts how low banks can drive their capital requirements by measuring asset risk with their own statistical models.

Europe has been pushing for a floor set at 70 percent of the result yielded by using a standard formula set by regulators. Negotiators split the difference and settled on a 72.5 percent floor, while the US wants 75 percent.

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Whether that's enough to satisfy France, the staunchest opponent of the floor, remains to be seen. The next step could come as soon as this week, when central bankers including Francois Villeroy de Galhau, governor of the Bank of France, descend on Washington for a series of international meetings, according to Reuters.

Pressure for a breakthrough has been rising in recent weeks, with Sabine Lautenschlaeger, a member of the European Central Bank's Executive Board, warning that "all banks will struggle if there is no agreement" by year-end.

The Basel Committee brings together regulators from around the world, including the Bundesbank, the ECB, the Bank of France, the US Federal Reserve and Japan's Financial Services Agency.

(With inputs from Reuters)

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