Banks Push Back at Basel III
Banks Push Back at Basel III
Banks and exchanges are pushing back against Basel III, even as international regulators say it will go into force as expected.
In response to a request by industry participants, the US federal banking agencies, on 9 November 2012, released a joint release indefinitely delaying the 1 January 2013 US implementation of Basel III.
Industry participants that oppose the onerous and complicated requirements of Basel III may succeed in permanently eliminating a US implementation. Although it is likely that enhanced capital and risk standards, as mandated by the Dodd-Frank Act will be implemented, they may however, depending on certain pending initiatives, be prescribed through government and industry collaboration.
The reason for the delay granted by the banking agencies is significant because if the delay is strategically leveraged with a pending congressional bill, which stipulates performance objectives rather than behavior modification as a basis for adequate regulation, the stage is set to permanently oust Basel III, and its intricate requirements, from the US.
Basel III, which was drafted by the Bank for International Settlements and endorsed by the G-20, is a comprehensive regulatory reform intended to improve the banking sector’s ability to absorb shocks arising from financial and economic stress and to improve risk management, governance and transparency in the banking sector.
Although considered highly authoritative, Basel III standards are adopted and implemented by each member country, and are not universally legally binding. In the US, statutory authority, such as the DFA, supersedes a Basel III-type directive.
Industry participants say the complexity of many of the final rules including new risk-weights and excessively burdensome record keeping requirements on smaller banks, the relief granted was expressly based on the industry’s lack of understanding of the rules and additional technology requirements.
Exchanges are concerned that Basel III’s ‘one size fits all’ rules for capital charges based on the risk of cleared derivatives is at odds with the objectives of Dodd-Frank and the G-20 mandates.
“If clearing houses properly set margins for liquid derivatives to cover one or two day risk while banking regulators impose a capital charge based on five days, banks and ultimately their customers will be burdened with increased costs from unwarranted capital requirements,” said Terry Duffy, executive chairman and president of CME Group, in congressional testimony late last month. “This may eliminate an incentive to trade liquid exchange-traded derivatives instead of other derivatives products with higher risk profiles.”
“The capital rules should be replaced with an approach consistent with standards recognizing that margin levels will differ based on the liquidity, transparency and other risk-reducing characteristics of each product,” Mr. Duffy said.
At its meeting last week, the Basel Committee on Banking Supervision discussed the progress of its members in implementing the capital adequacy reforms within Basel III.
“While some jurisdictions have not been able to meet the planned start date, a large number will be ready to begin introducing the new capital requirements as planned on 1 January 2013,” said Stefan Ingves, chairman of the Basel Committee, in a statement.
It is expected that as remaining jurisdictions finalize their domestic regulations during Y 2013, they will incorporate all the remaining transitional deadlines in line with the original global agreement, even where they have not been able to meet the 1 January 2013 start date.
So, by the end of Y 2013, almost all Basel Committee jurisdictions will be implementing Basel III in accordance with the agreed timetable.
- IRS Investigation, Top White House Staffers Were Briefed Early
May 21, 2013
- Jim Rogers, Bernanke to Leave Fed to Avoid Hangover From His Policies
- Thai Q-1 GDP +5.3% on Year; Government Cuts 2013 Growth Forecast
- Thaksin pushes for charter rewrite, Red-Shirts rally
- Benghazi is outright malfeasance, lying, criminal cover-up
May 20, 2013
Heffernan Capital Management
Business Development Director – Private Client Group,
3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
Best Hedge Funds 2013
Working with some of the World’s largest financial institutions HCM’s goal is to provide portfolio returns that exceed the S&P 500 Index benchmark while …
UAE Economy Seeing a Spring Boom
Driven by stable high Crude Oil prices, tourism, diversification and a liberal trade policy, the United Arab Emirates (UAE) witnesses an unprecedented …
Starbucks NASDAQ:SBUX is Rebuilding Its Seattle’s Best Coffee Brand
MCD, DNKN, BKW, DAL, WMT
Starbucks Corp.’s Seattle’s Best Coffee brand, doomed when Borders bookstores closed in Y 2011 is …
The Hot List
Enviro-Serv Inc (OTCMKTS:EVSV), Medical Marijuana Inc (OTCMKTS:MJNA)
Enviro-Serv Inc (OTCMKTS:EVSV)
EVSV had a stellar dy yesterday, ut it looks like it is just the begining of big things, good …