Global Banks Caught in Capital Rules Delays, Basel Group Says

Most global banks deemed too big to fail may not be forced to start applying international capital and liquidity rules from January because national lawmakers are struggling to meet the deadline for implementing them, regulators said today.

The Basel Committee on Banking Supervision said there’s a “high probability” that some nations won’t meet a Jan. 1, 2013, deadline for overhauling their bank capital rules. The laggards, including the U.S. and European Union, contain the majority of the world’s systemic banks, it said in a report published on its website.

“This means there is now a high probability that just six of the 29 globally systemically important banks” will be covered by the so-called Basel III rules from the “agreed start date,” the group said in the report, submitted to the Group of 20 nations.

Global regulators last year compiled the list of 29 so- called globally systemic banks, saying they should hold more capital than required by other international agreements. Citigroup Inc., JPMorgan Chase & Co. (JPM), BNP Paribas SA (BNP), Royal Bank of Scotland Group Plc, and HSBC Holdings Plc (HSBA) were provisionally earmarked to face the top level of surcharges, set at 2.5 percent of risk-weighted assets.

Those surcharges would come on top of Basel III standards, and would be phased in from 2016. Other parts of the Basel overhaul are scheduled to take effect from January and should be fully applied by 2019.

International Standards

Stefan Ingves, chairman of the Basel committee, said today he’s seeking swift progress toward implementation of the international standards.

“We expect that the remaining jurisdictions will be able to finalize their rules swiftly and in a way that is true to the globally agreed minimum requirements,” he said.

The Basel group said that “only eight” of its 27 members have taken all necessary steps to implement the standards, which more that triple the core capital that lenders must hold against losses. These are: Australia, China, Hong Kong, India, Japan, Saudi Arabia, Singapore and Switzerland.

Global regulators have said they’ll publish an updated list of systemically important banks once it’s been submitted to a meeting of G-20 finance ministers next month.

The Basel group is also carrying out “on-site visits” of banks as part of a probe into whether lenders are correctly assessing the risk of losses on their assets, according to the report.

Preliminary inspections have shown “material unexplained” differences in the losses banks expect to suffer, according to the report. Detailed findings will be reported to the committee “around the end of 2012 or early 2013.”

Diplomats will discuss the EU’s implementation of the Basel rules at a meeting on Oct. 31, according to the bloc’s website.

To contact the reporter 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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