Bankers warn against accelerating Basel timetable

Sunday, 10 October 2010 23:25 - - {{hitsCtrl.values.hits}}

Washington (Reuters): International bankers on Saturday warned that forcing financial institutions to meet new capital requirements too quickly could hurt economies worldwide.

They expressed concern that individual countries may require their banks to meet new capital and liquidity standards before the 2019 deadline agreed to last month by negotiators from 27 countries under what is known as the Basel III agreement.

“There is a real concern on the part of the industry about acceleration of the phasing-in process being required by national governments,” said Josef Ackermann, the chief executive of Deutsche Bank and chairman of the Institute of International Finance. The IIF is holding its annual meeting this weekend in Washington.

The global economy is still fragile, Ackerman and other bankers at the event warned, and moving too quickly on capital standards could stifle the recoveries already under way. The new rules will force banks to hold top-quality capital equal to 7 percent of their risk-bearing assets, more than triple than current standards, so they can better withstand economic downturns and financial shocks. Banks will have until 2015 to meet the minimum core Tier 1 capital requirement, which consists of shares and retained earnings worth at least 4.5 percent of assets. An additional 2.5 percent “capital conservation buffer” will have to be in place by 2019.

Leaders from the Group of 20 developed and emerging nations are set to endorse Basel III when they meet in Seoul in November. Implementation will be left to each country.

Regulators at the event downplayed the idea that the timetable would be moved up, saying representatives from 27 countries agreed to the 2019 specifically to make sure economies across the globe would not be negatively impacted by the new requirements.