European shares dip, banks surge on Basel news

Comments (2)
mountainrose wrote:

Banks won watered down rules when then Clinton’s sec of treasury, former Goldman Sachs board member and CITI CEO , Rubin, convinced congress to repeal the Glass Stegall bank act passed following the great depression precisely to avoid allowing banks from engaging in highly leveraged speculative activities that led to the 08 crash. Good to see they learned their lesson

Jan 07, 2013 6:00am EST  --  Report as abuse
GeorgeLekatis wrote:

1. The LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019. This graduated approach is designed to ensure that the LCR can be introduced without disruption to the orderly strengthening of banking systems or the ongoing financing of economic activity.

2. During periods of stress it would be entirely appropriate for banks to use their stock of high quality liquid assets (HQLA), thereby falling below the minimum

3. Banks will be able to count a much wider variety of liquid assets towards their buffers, including some equities and high-quality mortgage-backed securities.

4. European and American banking stocks surged because they will incur much reduced costs due to the implementation of the relaxed rules.

5. Banks in many other counties will have no benefit, as supervisors have already asked for strict liquidity rules, and they are not willing to take it back.

6. On the negative side, the main objective of Basel iii is to restore investor confidence. The Basel Committee has developed the new framework as a response to the crisis, and has explained (time and time again, every month since November 2010) the need for these strict rules.

Although it is true that Basel iii is an overreaction to the market crisis, it is way too late now to “ease” the rules and make investors happy the same time. This is simply a red flag for investors, leading to the conclusion that banks could not really comply. I have several telephone calls and shareholders ask the same question: What is wrong with the banks?

I agree with the Liquidity Coverage ratio (LCR) Basel iii amendment, but I cannot agree with the way it was presented.

George Lekatis
Basel iii Compliance Professionals Association (BiiiCPA)

Jan 07, 2013 6:29pm EST  --  Report as abuse
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