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International Trade May Be Harmed by Basel Rules, Companies Say

Nov. 2 (Bloomberg) -- Companies may face higher costs and reduced financial support when exporting or importing goods as a result of reforms to bank capital rules, a coalition of business associations warned today.

The reforms will harm global trade and economic growth by increasing the amount of capital that banks must hold when they provide trade finance, the associations, which include the Institute of International Finance, and the National Foreign Trade Council, said in a letter to the Group of 20 countries.

“Policies which put at risk the affordable trade of essential goods and adversely impact import/export business and emerging markets work at cross-purposes with the G-20 economic goals,” the letter said.

The G-20 has asked the Basel Committee on Banking Supervision to reform capital rules for banks to ensure that they can’t build up excessive levels of risk on their balance sheets. Banks say that some reforms proposed by the Basel committee will add to what they see as already too high capital charges on trade finance, making it less attractive for them to provide it.

Trade finance consists of short-term loans and guarantees provided by banks to companies to support import and export activities.

To contact the reporter on this story: Jim Brunsden in Brussels.

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

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