Basel Delay Should Carry Consequences, Mexico Says

The Group of 20 nations should create enforcement mechanisms to punish members that don’t begin implementing new banking rules by year-end, a Mexican Finance Ministry official said.

The G-20 should ensure that banks from nations that fail to implement Basel III rules don’t have an unfair advantage when operating in countries that have fulfilled the requirements, said Manuel Valle, head of the finance ministry’s banking unit. Basel III strengthens banks’ capital requirements and standards for liquidity and leverage.

For nations that don’t comply with the rules, “now it seems like nothing happens,” said Valle, the head of the ministry’s banking unit, in an interview in Mexico City, where his nation is hosting a meeting of G-20 finance ministers. “If these measures were agreed upon at the G-20 level, we have to find mechanisms within the G-20 to require that everyone complies with them.”

European Union lawmakers and officials discussed pushing back when lenders need to start phasing in the rules by as much as a year on concern that pressing ahead with the original timetable may drive up costs, according to three people familiar with the talks last month.

The Basel Committee on Banking Supervision said Oct. 29 there’s a “high probability” that some nations won’t meet a Jan. 1, 2013, deadline for overhauling their bank capital rules.

Broad Statement

Valle recommended Basel enforcement be taken up at future G-20 meetings, saying it probably won’t emerge from this week’s sessions. The communique to be released by ministers and central bankers after their meeting will probably include a broad statement reaffirming the group’s commitment to implementing the rules, Valle said.

He added that there appear to be no plans within the G-20 to push back the timetable for Basel III compliance.

Angel Gurria, Secretary-General of the Paris-based Organization for Economic Cooperation and Development and a former Mexican finance minister, said he didn’t think a delay in implementing rules would necessarily help a country’s banks.

“The market is taking care of that; nobody is going to wait until 2019 to be ready,” Gurria said in an interview, referring to the deadline for full implementation of the new capital requirements. Having the rules in place is a “competition question” for banks, he said.

“Sometimes banks have to take difficult, painful decisions so the system can have more resilience,” Gurria told reporters at an event on the sidelines of the G-20 meeting. “Time is running out because the market is very severely honing in on these numbers.”

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