The proposed new global banking rules that more than double capital requirements for lenders need to be implemented and supervised rigorously to be effective, said the head of the group that drew them up.
The revised standards also need to keep pace with financial innovation in a banking system that has stabilized and is recovering, Nout Wellink, chairman of the Basel Committee on Banking Supervision, said at an international meeting of bank supervisors in Singapore today.
“We must remember that memories fade quickly,” Wellink said in a speech. “Regardless of how tough the new standards are and how we expect them to increase the resilience of banks and banking systems, they must be effectively implemented and enforced.”
The Basel committee this month said it will require lenders to have common equity equal to at least 4.5 percent of assets, weighted according to their risk. Regulators will introduce an additional capital buffer of 2.5 percent to withstand future stress, and banks that fail to meet that second buffer would be stopped from paying dividends, though not forced to raise cash.
While the measures will be phased in by the end of 2018, Wellink encouraged lenders to implement them sooner.
“Countries should move faster if their banking systems are profitable and able to do so without having to restrict credit,” he said. “Banks should not be permitted to increase their distributions if they are still below the ultimate target but feel they can take their time to get there.”
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