The United States has delayed indefinitely the implementation of new tougher banking standards, known as Basel III, beyond the internationally-agreed date of January 1, 2013.
Under Basel III, banking regulators worldwide would have raised capital charges around three times and imposed stricter supervision, especially on major banks such as Citigroup and JP Morgan Chase, to prevent a repeat of the 2008 global financial crises.
Although Group of 20 finance ministers and central bank governors, including those from the U.S., agreed to implement Basel III only last week, there has been increasing pressure to delay the start due to the complexity of the rules and the cost to banks at a time of weak global economic growth.
The Federal Reserve issued its version of the Basel III rules in June and asked for comment. Today it said that many bankers had told it they were concerned they would be subject to the new capital rules “without sufficient time to understand the rule or to make necessary systems changes.”
“In light of the volume of comments received and the wide range of views expressed during the comment period, the (U.S. federal banking) agencies do not expect that any of the proposed rules would become effective on January 1, 2013,” the Federal Reserve said.
The Federal Reserve added the U.S. took seriously its commitment to implementing Basel III and was working “as expeditiously as possible to complete the rulemaking process.” It did not give a new target date for implantation.
Aware of the major impact the new banking rules would have, global banking supervisors had set a rolling timetable for implantation, starting with 2013 when regulations should be in place, through January 2019 to allow banks to slowly meet the standards.
But it had become increasingly clear that many countries were behind the timetable and this would subject major global banks to an uneven playing field.
Some US and UK government officials, including Thomas Hoenig, who retired from the Federal Reserve in April and joined the Federal Deposit Insurance Corp. and the Bank of England’s Andrew Haldane, had called for a delay and redrafting of the Basel rules as they were too complicated.
On Oct. 31, the Financial Stability Board (FSB), which monitors international financial regulation, said that only eight of 27 countries had issued their regulations, and this meant that it was highly probably that only six of 28 global systemically important banks would be subject to Basel III in January 2013.