* Basel to finalise new rules for top global banks by Nov
* New deadline year earlier than originally planned
* Rules to define global systemically important bank (GSIB
* GSIBs have to hold capital greater than 7 pct minimum
By Huw Jones
LONDON, July 3 Global banking supervisors are
speeding up work on tougher capital rules for the world's top
lenders, in a bid to dispel some of the regulatory uncertainty
over a sector whose reckless behaviour caused the credit crunch.
The Basel Committee, made up of banking supervisors from
nearly 30 countries, said on Wednesday it will finalise its new
rules for top global banks by November, a year earlier than
originally planned, so lenders have more time to prepare.
The rules being applied are important partly because they
will help define a top section of so-called global systemically
important bank (GSIBs) and how much extra capital they need to
hold. Phasing-in of the rules is due to start in 2016, with full
compliance in 2019.
Leaders of the world's top economies (G20) approved the
tougher regime for nearly 30 of the world's biggest banks in
November 2011, after lenders had to be rescued by taxpayers in
the financial crisis.
The rules require top banks to hold a level of capital even
greater than the 7 percent minimum of their risk-weighted assets
which all banks globally must hold under the Basel III accord.
Thus banks such as Goldman Sachs, HSBC and
Deutsche Bank must hold a further 1 to 2.5 percent of
capital above the Basel minimum, in recognition of the mayhem
that could result in world markets if they fail.
Yet the eventual impact remains to be seen of the revised
methodology to determine who is a GSIB - and how much extra
capital they must hold.
Revisions to the methodology, issued by the Basel Committee
on Wednesday, consists of indicators looking at a bank's assets
and how interconnected it is with other banks.
Basel has sought to inject more precision in how a bank's
assets are added up to gauge their level of riskiness.
Some top-quality assets that can be sold easily in stormy
markets must now be excluded from calculations to put greater
focus on the volume of assets "that may suffer a fire sale
discount if sold during a period of severe market stress".
Basel is now gathering more data from banks to complete its
work by November so banks can work out whether they are a GSIB
and if so, the size of their capital surcharge.
"These elements will enable banks to calculate their scores
and higher loss-absorbency requirements using end-2012 data,
prior to the requirements coming into effect based on end-2013
data," the Basel Committee said in a statement.
The regulators are due to publish an updated list of GSIBs
in September at the next G20 summit in Russia. Some banks on the
current list are likely to drop out after shrinking their asset
base, while others may end up being on the list.
Investor and supervisory pressure has already forced the big
banks to meet or exceed their capital targets, years ahead of
the formal timetable.
On Tuesday the Federal Reserve approved rules putting the
Basel III and GSIB capital regime into U.S. law, mirroring a
move already taken by the European Union.
Credit rating agency Standard & Poor's (S&P) said late on
Tuesday that higher capital requirements and a narrowing of the
scope of business activity will leave "fewer or less-attractive
business opportunities for regulated and systemically important
It cut its ratings on three big banks - Deutsche Bank,
Barclays and Credit Suisse - citing the
pressure of new rules on income.
G20 regulators are also due to publish shortly a list of the
world's biggest insurance companies who, like the biggest banks,
will have to hold extra capital and faces closer scrutiny.