September 12, 2010 / 6:32 PM / 9 years ago

Factbox: Reactions to Basel III bank capital rules

BASEL (Reuters) - Banks will have to more than triple to 7 percent the amount of top quality capital they hold to withstand future shocks, global regulators and central bankers agreed on Sunday.

The agreement, known as “Basel III”, will force banks to set aside far more capital to withstand market shocks in future in a bid to lessen the need for bailouts by governments seen during the financial crisis.

Following are some reactions and official statements issued after the agreement:

TIM RYAN, CEO THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIAITON

“The Committee’s proposals appear to move in the same direction as the requirements enacted into law by the Dodd-Frank Act, while providing a reasonable time frame for implementation.

Yet we believe a number of issues must be resolved if these proposals are to support stability without constraining the supply of capital which is essential to support economic growth and job creation.

These new rules will have a large economic impact when fully implemented. So, it is critical that they be implemented with consideration to providing stability and confidence to financial system without limiting long term economic growth.”

ROB MCIVOR, DIRECTOR OF COMMUNICATIONS, ASSOCIATION OF FINANCIAL MARKETS IN EUROPE

“It appears that the Committee has recognized the importance of ensuring that, in the transition to the new regime, recapitalization timing does not undermine the banks’ ability to meet their customers’ credit requirements.

“However, even now, there remain significant concerns, particularly the proposal to designate some firms as systemically important and therefore burdened with additional requirements.

“We believe this would be fraught with difficulty — as, in other contexts, the Basel Committee has recognized — and unnecessary.

“Banks will need to do a great deal of work over the next few weeks to assess fully what the impact of the Basel proposals will be. Disproportionate requirements would be damaging for both the financial sector and the wider economy. Continuing uncertainty over what is required could have a negative impact on the banks’ ability to plan ahead, which in turn will act as a brake on recovery in European economies.”

RICHARD BARFIELD, DIRECTOR, PRICEWATERHOUSECOOPERS

“One of the features of the phasing in they are proposing is that in the later stages you will get an accelerated effect with the deductions and increase in ratios.

“I expect that what will happen is that the larger banks will move toward these figures ahead of the timetable.

“Apart from a consistent worldwide application, it’s important that capital is just part of the process of improving financial stability, and the other key factors are improved supervision, improved risk management, and making those things happen as well is the difficult challenge.

“There is also a risk in the approaches. In terms of the countercyclical buffer, you have a bald number to protect against excess credit, but bubbles tend to affect individual asset classes at different points in time so it’s a blunt instrument. To manage risk you have to be more targeted.

“The Basel Committee has achieved a lot in a short time in the world of banking regulations.”

U.S. TREASURY SECRETARY TIMOTHY GEITHNER

“We welcome this next step on the way to strong global financial reforms and look forward to reviewing the details of these proposed reforms to global capital requirements.

“We remain committed to reaching agreement by the time of the G20 meeting in Seoul on a strong set of reforms that will reduce the costs of future financial crises, provide certainty to the markets and secure a level playing field for U.S. financial institutions.”

ROBBERT VAN BATENBURG, HEAD OF EQUITY RESEARCH, LOUIS CAPITAL MARKETS, NEW YORK

“It’s a mixed blessing for the banks but I’m sure investors will be happy to get some clarity and allow the market to move on.

“I don’t think there are any nasty surprises and there’s a time frame to allow for plenty of time to raise capital if needed. The best thing is it removes the uncertainty that was hanging over the market... The markets should take this favorably.”

MOHAMED EL-ERIAN, CO-CHIEF INVESTMENT OFFICER, PIMCO

“The phasing-in period for the new capital requirements is surprisingly long, which will add to the skepticism about the robustness of the bank capital enhancement efforts.”

SIMON HILLS, DIRECTOR, BRITISH BANKERS ASSOCIATION

“I think it’s broadly in line with what we expected.

“The question is how much monitoring there will be while the changes are being introduced. It’s important there is ongoing monitoring and reassessment to make sure it’s doing what we expect it to do and not have any unintended consequences we are nervous about.

“It looks like a good step toward increasing resilience of the banking system.

“What is important is that the Basel Committee starts work now to make sure there are globally accepted policies and procedures in place to make sure these rules are implemented in a harmonized way.

“I think the banking sector can live with this deal. The capital conservation buffer is a bit lower than we had feared.

“There has been a tremendous focus on getting this done quickly and it has been done to the G20 timeframe which is why we need this ongoing monitoring and ability for mid-course corrections.”

CHRIS WHEELER, ANALYST, MEDIOBANCA, LONDON

“It is clear that as a result of concerns about the anemic economic environment, Basel is trying to balance the need for tougher regulation with supporting the banks’ inevitable role in the recovery. Hence the long implementation time frame.”

BOARD OF GOVERNORS, U.S. FEDERAL RESERVE SYSTEM

“The agreement represents a significant step forward in reducing the incidence and severity of future financial crises, providing for a more stable banking system that is less prone to excessive risk-taking, and better able to absorb losses while continuing to perform its essential function of providing credit to creditworthy households and businesses.”

DANIEL ZUBERBUEHLER, VICE CHAIRMAN, BOARD OF DIRECTORS, SWISS REGULATOR FINMA, ALSO A MEMBER OF BASEL COMMITTEE

“This will enable them (banks) to withstand larger shocks without relying on government support. As a result, the global financial system will be more resilient to shocks.

“In light of the current crisis that highlighted the fragility of the banking sector such a reform was indispensable. To make sure that their implementation supports economic recovery, capital and liquidity requirements will be introduced gradually over the next decade.

“The FINMA and SNB strongly support these efforts.

“At the domestic level, we remain confident that the commission of experts can build on today’s agreement and submit a set of proposals to the government. It is our responsibility to do all we can to ensure that in the future:

* systemic banks will be significantly more resilient than the other banks

* they have incentives to reduce their systemic importance

* the resolvability of large banks with cross-border activities is facilitated”

PHILIPP HILDEBRAND, CHAIRMAN OF THE GOVERNING BOARD OF THE SWISS NATIONAL BANK (SNB)

“The reform package will ensure that, going forward, banks will hold much larger buffers of higher quality capital and liquidity. This will make the global financial system more resilient to future shocks. Gradual implementation of the new standards will support the economic recovery.

“While the reform package is far-reaching, it does not yet comprehensively address the TBTF (“too big to fail”) problem. Further efforts will be required in that area at the international and at the national level.

“For Switzerland, the Basel III reform package provides a solid foundation on which to build a comprehensive national regulatory response to the TBTF problem.”

UBS

“UBS took note of the recommendations issued by the Basel Committee today. The Basel Committee set the international minimum standards, which have to be implemented by national regulatory authorities.

“For UBS the relevant standards are mainly set by the Swiss financial supervisory authority FINMA. UBS will comply with the regulatory changes within the given time frame.”

AGUSTIN CARSTENS, MEXICO CENTRAL BANK CHIEF, AND GUILLERMO BABATZ, HEAD OF MEXICO’S NATIONAL BANK COMMISSION

“For Mexico, the modifications will not be very profound since we already have very tight regulations on bank capital” (Reporting by Steve Slater, Huw Jones, Mark Felsenthal, Jennifer Ablan, Catherine Bosley, Sakari Suoninen and Natsuko Waki)

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