Global Regulators Weigh Moves to Simplify Bank Capital RulesJim Brunsden
Global regulators are weighing options for simplifying bank capital rules amid concerns that the complexity of existing standards has made it difficult to evaluate and compare lenders’ financial health.
The Basel Committee on Banking Supervision said it’s seeking views on measures ranging from forcing banks to disclose more data to setting them tougher indebtedness limits, as the group assesses the need for changes to its rulebook.
“The committee is keenly aware of the current debate concerning the complexity of the current regulatory framework,” Stefan Ingves, the Basel group’s chairman, said in a website statement. Regulators are seeking “further input on this critical issue before deciding on the merits of any specific changes,” he said.
Andy Haldane, the Bank of England’s executive director for financial stability, and board members of the U.S. Federal Deposit Insurance Corp. are among supervisors to have advocated a simplification of existing Basel rules, notably by placing more reliance on leverage ratios -- a type of capital requirement that doesn’t allow banks to take into account the riskiness of assets they hold.
Other regulators, such as Bundesbank Vice President Sabine Lautenschlaeger, have warned that this simplicity could be a disadvantage, as safer and riskier assets are treated alike, so potentially encouraging irresponsibility.