September 22, 2011 / 5:25 PM / 6 years ago

Basel rules level bank playing field-Fed official

* Fed official says Basel will be tough on all banks

* Clearing House releases study against surcharge

By Dave Clarke and Alexandra Alper

WASHINGTON, Sept 22 (Reuters) - New international capital standards will not put the largest U.S. banks at a competitive disadvantage against their foreign competitors, a top Federal Reserve official said on Thursday.

Large U.S. banks have complained that while the standards are intended to apply internationally, they will be a step too far for large U.S. institutions already facing new regulatory requirements under the 2010 Dodd-Frank financial oversight law.

Banking leaders, such as JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon, contend regulators are not weighing the cumulative impact of all regulations. They have been particularly critical of the stricter capital standards that the largest banks will have to meet as part of the Basel III international regulatory agreement.

Mark Van Der Weide, a senior staff member at the Federal Reserve’s Division of Banking Supervision and Regulation, said Basel negotiators did not develop the capital standards in “a vacuum” and took into account the various new rules banks are facing both in the United States and elsewhere.

He said certain aspects of the Basel agreement, such as how mortgage servicing rights are treated, may be harder on U.S. banks. Other aspects of the deal, such as a new leverage ratio, will weigh more heavily on banks headquartered in Europe or elsewhere, he said.

“We can keep the playing field relatively level,” Van Der Weide said at a conference hosted by PricewaterhouseCoopers and Georgetown University. He added he was voicing his own opinion, not official Fed policy.

The Basel agreement will require banks to maintain top-quality capital equal to 7 percent of their risk-bearing assets.

On top of that, global “systemic” banks may have to hold up to an additional 2.5 percent buffer. Another 1 percent surcharge would be imposed if a bank became significantly bigger.

    The heads of the Group of 20 leading and emerging economies are expected to give final approval to these rules in November and then it would be up to each country to implement them.

    The banking industry is mounting an intense lobbying campaign against the section of the Basel agreement that would require the world’s biggest banks to hold more capital.

    Banking executives and their lobbying groups contend the higher standards would result in less lending, which in turn would hurt the economy.

    Regulators and other supporters of higher capital standards have countered that the economy would benefit from a sounder financial system and that the industry is overstating the impact of the rules on lending.

    On Thursday the Clearing House, a group representing large international banks, released a study arguing against the additional capital charge on large banks.

    The group contends that the minimum capital standards for all banks required by Basel III would make the largest institutions sound enough to weather future economic or market storms.

    The group represents institutions such as Citigroup (C.N), JPMorgan Chase, Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N). (Reporting by Dave Clarke and Alexandra Alper, editing by Gerald E. McCormick)

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