Friday, December 14, 2012

Nearly all major nations to implement Basel III in 2013

    Nearly all major countries will be implementing new, stricter global banking rules by the end of 2013 even if some countries will not meet the deadline of January 1, the Basel Committee on Banking Supervision (BCBS) said.
    Following a two-day meeting of global banking supervisors in Basel, Switzerland, it's chairman, Stefan Ingves, said 11 jurisdictions had now published final Basel III banking regulations that take effect on January 1, 2013 and seven other jurisdictions had issued draft regulations and indicated they are working towards issuing final versions as quickly as possible.
    "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," Ingves said in a statement.
    During 2013 the remaining jurisdictions will incorporate all remaining deadlines in their national rules in line with the original agreement, even if they didn't meet the January 1 deadline, he said.
    "Hence, by the end of 2013, almost all Basel Committee jurisdictions will be implementing Basel III in accordance with the agreed timetable. This is an absolutely critical step towards strengthening the resilience of the global banking system," Ingves added.

    The ambitious Basel III banking rules were agreed by global leaders in 2010 in an effort to strengthen the global financial system following the 2008 global financial crises. The rules raise capital charges on banks around three times and impose much stricter supervision, especially on major, globally-active banks.
    The new rules will gradually take effect, starting in 2013 when regulations should be in place, through January 2019 to allow banks to meet the rules without leading to any drop in lending to businesses and harm to the economic recovery.
    But Basel III has been criticized for being overly complex with some U.S. and UK officials calling for a delay in implementation and a redrafting.
    Last month the United States delayed indefinitely its implementation of Basel III beyond January 1, 2013, raising concern of an uneven global playing field among major commercial banks as some countries impose the new rules while other countries use other standards.
    Although it didn't give a new target date for implementing Basel III, the U.S. Federal Reserve said it was working "as expeditiously as possible" to complete the regulatory process. The European Union is also in the process of finalizing its Basel III rules and expected to start applying them in January 2014.
    Despite the delay in adopting Basel III into national legislation, Ingves said "national supervisors are ensuring that internationally active banks are, where necessary, making steady progress in strengthening their capital base in accordance with the Basel III framework."
    During this week's meeting, all 28 members of the Basel Committee reiterated their commitment to implementing the new rules and several members will be subject to peer reviews next year. When these reviews have been completed, all jurisdictions that are the main regulators of global systemically important banks (known as G-SIBs in supervisory speak) will have been subject to peer reviews.
    The 11 jurisdictions that will be implementing Basel III from January 1 are: Australia, Canada, China, Hong Kong, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa and Switzerland.
    The 7 jurisdictions that have issued draft regulations and are working towards final versions are: Argentina, Brazil, the European Union, Indonesia, Korea, Russia and the United States.
    Turkey will issue its draft regulation early next year.


  1. Hmm, I wonder if that will result in slower credit growth - could it prolong the deleveraging cycle?

  2. Probably, but supervisors/central bankers would argue that any impact/cost of the new rules pales in comparison to the cost of the 2008 financial crises. And I think they would gladly accept slightly slower credit growth for the next few years if the new rules can prevent another major financial crises. We are now entering 2013, i.e. the ramifications of the financial crises are still with us 5 years later and it's unclear when US/Europe will ever return to their previous growth trend. Did the financial crises alter their growth trend forever?