Global banking officials not seeking higher capital, Basel chief says

Monday, 10 October 2016 00:01 - - {{hitsCtrl.values.hits}}

WASHINGTON (Reuters): New global banking rules are meant to prevent a future financial crisis and not simply punish banks with costly rules and capital requirements, the head of the Basel Committee on Banking Supervision said on Friday.

The Basel Committee made up of regulators from nearly 30 countries has promised to outline new global standards by the end of the year.

Regulators expect to make that deadline and the rules are not meant to be punitive, said William Coen, Secretary General of the Basel Committee.

“This is not an exercise in increasing regulatory capital requirements,” Coen told a meeting of the Institute of International Finance.

The world’s largest banks are required to hold a certain amount of capital, like common shares, to shield themselves from market shocks and losses.

Officials have said that riskier banks will likely pay a higher capital toll with the new rules, dubbed Basel IV.

“Some banks that are genuinely outliers may face a significant increase in (capital) requirements,” Coen said.

Basel IV will chiefly judge banks by the chance that their investments could default, but other factors like ‘operational risk’ - the risk from inadequate internal processess - could shape the capital demands, regulators said in March.

“The (Basel) Committee is considering adjustments to the March consultation paper on operational risk,” Coen said, suggesting that requirement could be altered.