Jack Ewing
NY Times
Top central bankers and bank regulators agreed Sunday on far-reaching new rules for the global banking industry that are designed to avert future financial disasters, but could also dampen bank profits and strain weaker institutions.
Officials confirmed that the panel of financial authorities from 27 countries had reached agreement Sunday afternoon and would release details later Sunday. The group includes Ben S. Bernanke, chairman of the Federal Reserve, and Jean-Claude Trichet, president of the European Central Bank.
If ratified by the G-20 nations later this year, the rules, known as Basel III, will require banks to bolster the amount of low-risk assets they hold in reserve as a cushion against market shocks. While the American Bankers Association and other groups have complained about the provisions, other bankers said the rules will help avert crises of the kind that nearly plunged the world into depression in late 2008.
“Banks will unarguably be safer institutions,” said Anders Kvist, head of treasury at SEB, a bank based in Stockholm that has operations around Europe.
Analysts had expected the Basel group to sharply raise the most bulletproof category of reserves, known as core Tier 1 capital, to about 8 percent of bank assets from as little as 2 percent under current rules.
In addition, regulators were expected to oblige banks to raise their reserves even more during boom times, as insurance against a sudden market collapse. Banks would have to add an additional 3 percent of assets to their reserves, to a total of about 11 percent.
Some analysts predicted that banks might even be required to set aside as much as 16 percent in boom times.
The regulators were also expected to impose a so-called leverage ratio, a new requirement which would oblige banks to maintain reserves of at least 3 percent of total assets, including derivatives or other instruments that they might not carry on their balance sheets.
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