Banks May Face Extra Basel Capital Rules for Interest Rate Risks

Global regulators may force banks to hold more capital to guard against the risk that they may lose money from changes in interest rates, Stefan Ingves, chairman of the Basel Committee on Banking Supervision, said today.

Authorities will examine “the need for a capital framework for interest rate risk” on assets that lenders plan to hold to maturity, Ingves said in prepared remarks for a speech in Basel, Switzerland today. Such a move may improve consistency with capital rules on assets banks intend to trade, Ingves said.

The Basel committee is also planning to review its capital rules to see if they could be simplified, Ingves said. This issue will be discussed at a meeting of the group that begins tomorrow in the city, he said.

Regulators are pushing to complete an overhaul of international bank requirements that was started in response to the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. The rule changes, known as Basel III, more than triple the core reserves that lenders must hold against insolvency, and set minimum liquidity standards.

The work on capital rules for interest-rate risk and simplification “will be the last pieces in what has essentially been a complete overhaul of the regulatory framework since the financial crisis,” Ingves said. The plans are “still at an embryonic stage,” he said.

The Basel committee this year will also press ahead with work on a binding indebtedness limit for banks, and on reviewing whether banks are correctly calculating the capital they must hold, Ingves said.

The committee is hoping to publish the findings of the review “by the summer,” he said.