Mon, Oct 11, 2010 page11

• Basel Accord a minimum, expect more rules: bankers

  • Bloomberg
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  Central bankers from Switzerland and Canada told bank executives to expect more global financial rules, especially for the largest institutions.

  Switzerland’s Philipp Hildebrand, president of the Swiss National Bank, and Bank of Canada Governor Mark Carney told a panel of chief executives that included Bank of America Corp’s Brian Moynihan that the agreement reached in Basel by international regulators represented the “minimum,” Carney said.

  “There is unfinished business that is pretty important,” Carney said on Saturday at a panel discussion in Washington.

  Banks worldwide are grappling with the new rules approved last month by regulators, meeting as the Basel Committee on Banking Supervision. New minimum capital requirements take effect in less than five years. The banking industry persuaded regulators to soften rules after a lobbying campaign, pushing off implementation of some requirements for about a decade.

  “The acceleration of the Basel calendar is a big risk,” said Alfredo Saenz Abad, the chief executive officer at Madrid-based Banco Santander SA Common Equity

  The Basel rules would require lenders, in less than five years, to hold common equity equal to at least 4.5 percent of assets, weighted according to risk, and 6 percent of Tier 1 capital, which the group defines as common equity and perpetual preferred stock. Regulators will introduce an additional buffer of 2.5 percent to withstand future stress, the committee said. Banks failing to meet the second buffer would be stopped from paying dividends.

  Disappointed by what they saw as the weakness of those rules, some countries like Switzerland are moving ahead with their own tougher standards. Other international bodies, such as the Financial Stability Board (FSB), are working on additional measures to rein in the largest banks.

  “Nobody should be surprised” about stronger measures than the Basel agreement, Hildebrand said. “This is not about Swiss deciding randomly.”

  Marcus Wallenberg, the chairman of SEB AB, Scandinavia’s third-largest lender by assets, said on Saturday that countries creating their own new financial rules are a worry for the banking industry.

  “It’s going to be very difficult to have a completely different set of rules for different countries,” Wallenberg said.

  Bank members of the Institute of International Finance (IIF), which represents 400 financial firms worldwide, were in Washington this weekend for the organization’s annual gathering. The conclave coincided with a meeting of the IMF in the city, where G20 finance ministers also met last week. The G20 nations has put pressure on the Basel committee and the FSB for tighter rules on banks after the global credit crisis led to government rescues.

  “All the analysis we did suggested the levels should have been much higher,” Carney said.

  In June, the IIF published a report predicting that bank regulations would shave off 3.1 percentage points from economic growth in the developed world. The group is close to completing a revised version of the report to reflect the latest changes to bank regulations.

  An alternative impact study done by the Basel committee and the IMF found the impact on those nations’ economies to be about one-eighth of the IIF estimate. The Basel-IMF report didn’t take into account all new regulations being planned, the IIF said in its statement at the time.

  A primary concern for the bank executives was fees, or tax proposals, that would be aimed at the largest and most “systemically risky” institutions. The US has considered such a levy, although it is unlikely to act on one before next month’s elections.

  “Simplistic approaches involving a simple surcharge will not solve the problems and will likely prove counterproductive,” Deutsche Bank AG CEO and IIF chairman Josef Ackerman said in separate remarks.

  Moynihan said he expected the US would fully comply with the new international rules and that the Dodd-Frank financial regulation law enacted in July would implement much of the Basel regulations.

  “We assume we’re Basel compliant next week” if the bank needed to be, Moynihan said during the forum.
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