Singapore delays adoption of FRTB
HONG KONG: Singapore’s banking regulator has told lenders that it will delay by a year the implementation of global rules designed to rein in trading risks — the latest sign that the post-crisis overhaul of the world’s banking system may be stalling.
The move follows similar postponements by banking regulators in Hong Kong and Australia as concerns grow over the complexity of the rules and as it is also uncertain how they will fit with other capital reforms yet to be finalised.
The Monetary Authority of Singapore (MAS) notified local banks of the delay to the so-called ‘fundamental review of the trading book’ (FRTB) in a letter last month that also flagged a number of other regulatory issues, two people briefed on the matter said.
The people declined to be identified as the letter was not made public.
The rules were finalised last year by the Basel Committee on Banking Supervision as part of a decade-long international effort to prevent a repeat of the 2008-2009 global financial crisis.
The FRTB rules, which require banks to hold more capital against their trading books, were scheduled to become effective in January 2019.
A MAS spokeswoman said the regulator remained committed to a full implementation of Basel III reforms but was not rigidly adhering to a timeline.
“In determining the implementation timeline, MAS will consider factors such as the state of global implementation guidance, the industry’s readiness and implementation progress in other jurisdictions,” she said in a statement.
Basel has no powers of enforcement and relies on member countries to commit to the implementation of reforms agreed by the committee.
A person familiar with the committee’s workings said there was no sign of the FRTB being ditched outright.
“In addition, capital for trading books is a small proportion of a bank’s total buffer and therefore a delay in the FRTB does not materially affect the bigger capital picture for the banking sector,’’ this person said.
Group of 20 (G20) countries meet in Germany this week to take stock of the implementation of global banking reforms.
Mark Carney, chairman of the Financial Stability Board, which coordinates financial rules for the G20, warned on Monday that global growth would suffer if regulators give in to “reform fatigue” and fail to complete the agreed changes.
But after an intensive decade of rulemaking, some policymakers now want to prioritise growth over yet more complex banking regulation.
US President Donald Trump has said regulation is holding back lending and the US Treasury has recommended delaying the FRTB, as well as another measure that strengthens bank funding.
“Regulators in Asia are worried their banks may be at a disadvantage if they push ahead with the rules while other countries hold back,’’ the sources said.
The European Union’s executive European Commission has proposed delaying its full application of FRTB, and officials are now waiting to see whether US regulators follow the US Treasury recommendation.
The Hong Kong Monetary Authority said last month the FRTB rules would be implemented no earlier than January 2020, while the Australian Prudential Regulation Authority (APRA) announced a delay in March that would likely see the rules come into force in 2021.