Basel Regulators Approve Bank Liquidity, Capital Rules

Global regulators reached agreements on capital and liquidity measures paving the way for the release of overhauled rules for lenders by the end of this year, the Basel Committee on Banking Supervision said today.

Regulators also agreed on “key elements” of plans for holders of subordinated debt and preference shares to contribute to saving banks on the brink of failure, the Basel committee said in a statement following a two-day meeting.

The Basel committee said it “agreed on the details of the Basel III rules text, which includes global regulatory standards on capital adequacy and liquidity.”

The Group of 20 nations decided to bolster banks’ liquidity and capital to prevent a repeat of the worst financial crisis since the Great Depression. G-20 leaders last month endorsed rules, known as Basel III, which will more than triple the highest-quality capital, such as shareholders’ equity, that banks must hold to cushion against losses.

The leaders left it to regulators to complete the details of the new rules. The Basel committee brings together authorities from 27 countries to coordinate regulation and supervision of banks.

The Basel committee suggested in August that national regulators should have power to write off subordinated debt and preference shares or convert them to common shares. It will “elaborate” rules on “transitional arrangements” and treatment of existing holders of bonds and preference shares, the committee said today.

Quantitative Impact Study

The committee will also aim to publish by year-end a summary of a quantitative impact study on how the new rules will affect banks, it said today.

“It’s good news that the committee has accepted the need to publish aggregate results but what we’ll need to see is the basis on which they have been assessed,” Rob McIvor, a spokesman for the Association for Financial Markets in Europe, said in an e-mail.

“There are still many outstanding issues and we don’t know at this stage which ones the committee has resolved and which will therefore have fed into this assessment,” McIvor said.

Basel regulators will also start to seek views by the end of the year on how much capital banks should have to hold against potential risks linked to clearinghouses, the committee said.

The group will also “evaluate the impact” of Basel III on financing of international trade, the committee said.

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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