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Basel Committee Plans to Discuss Curbs on Bank Borrowing

The Basel Committee on Banking Supervision will discuss the leverage ratio, a standard aimed at curbing excessive borrowing by lenders, when it meets next week, said Bill Coen, the group’s deputy secretary general.

It will be “one of the weightier items on the agenda,” Coen told the RiskMinds conference in Geneva today. The surcharge on systemically important financial institutions “will be another significant issue,” he said.

Global regulators are split over the merits of a leverage ratio, which acts as a limit on banks’ indebtedness. While the measure is already applied in the U.S., the European Union hasn’t included it in proposals to boost the amount of capital the region’s lenders must hold. Michel Barnier, the EU’s financial-services chief, has said that there is a “lack of clarity about the effectiveness” of a leverage limit.

The Basel committee presented draft plans for a leverage ratio last year with a view to the standard coming into force in 2018 after further study. The proposed limit would require a bank to have Tier 1 capital equivalent to 3 percent of its assets.

A spokeswoman for the committee declined to provide further details on the timing of next week’s meeting, which brings together bank regulators from 27 countries including the U.S., U.K. and China.

There needs to be greater harmonization of financial regulations, Jose Maria Roldan, director of banking regulation at the Bank of Spain and a member of the Basel committee, said in a separate presentation at the conference.

“We are seeing a reduced level of integration in financial regulation,” he said. “The issue of goldplating,” where governments add national requirements to standards proposed by the committee, needs to be look at, he said.

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