No Basel bank capital deal this weekend
washington — Global banking regulators will not reach a deal this weekend to complete rules aimed at ensuring banks hold enough capital in a crisis, three senior central bank officials said on Friday.
France is refusing to back the rules unless other conditions are met, the central bankers said about the “Basel III” accord, a set of rules the Basel Committee began writing a decade ago after the 20072009 global financial crisis.
“No deal is coming here,” one of the central bankers said on the sidelines of International Monetary Fund meetings in Washington.
Basel’s oversight body, headed by European Central Bank President Mario Draghi, could endorse the compromise with majority backing if its members wanted to, officials familiar with the discussions said. It took this course with the main Basel III package.
William Coen, secretary-general of the Basel Committee, told a meeting of the Institute of International Finance (IIF) industry group also in Washington that a deal is close and urged everyone not to quit.
“Now, I think we’re almost there,” Coen said, adding the final decision was for the oversight body.
“No deal means that we have not finished the job and that we have failed to lay the groundwork for more resilient banks and a more stable banking system,” Coen said.
The bulk of the Basel III accord is already being applied by lenders, but one key hurdle remains to its completion.
Basel is trying to find agreement over an “output floor” that would limit the extent to which a bank’s capital requirements based on the lender’s own risk model can diverge from how they would be cal- culated under a more conservative model set by regulators.
Regulators have seen wide variations in how much capital banks set aside to cover the same risks, distorting competition in the sector.
A French official familiar with the talks told Reuters that France was not the only “hold-out” and that agreement was also needed on other issues as well, such as avoiding “front-loading” or forcing lenders to comply early with the new rules.
“The biggest issue is the trading activity review, which the US said it won’t implement pending a review. The US needs to be onboard fully in the market activity frameworks,” the French official said.
no deal means that we have not finished the job and that we have failed to lay the groundwork for more resilient banks and a more stable banking system
William Coen, secretary-general of the Basel Committee
Speaking during the same IIF panel with Coen, Societe Generale CEO Frederic Oudea said European and US banks were not operating on a level playing field and that European banks needed time to “digest” the implications of Basel III in the context of other new regulations coming into effect, including new accounting standards and EU trading rules, known as MiFID II.