Fed delays Basel III bank capital buffer rules
Regulators agree delay was necessary due to “wide range of views”
Stories You Might Like
26 ways to profit from ‘Obamacare’
Apple falls again as Qualcomm, Juniper gain
Market gains drive 401(k) balances sharply higher
0 Comments Share
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — U.S. regulators on Friday delayed the effective date of a global agreement on greater bank capital buffers reached in response to the financial crisis of 2008.
The rule delay could help big banks such as J.P. Morgan Chase & Co. JPM +1.70% , Citigroup Inc. C +0.42% , Goldman Sachs Group Inc. GS +0.77% who must ultimately comply with the rules, as well as smaller banks who also will have to meet the requirements.
Click to Play
Obama calls on Congress to tackle 'fiscal cliff'
President Barack Obama will call on Congress to take steps to help the economy and reduce the deficit.
The rules are considered a critical step to ensure large institutions are sufficiently cushioned against future financial shocks and the agreement is being implemented in response to the financial crisis of 2008.
Specifically, the Federal Reserve and two other bank regulators introduced a proposal in June to implement the global agreement known as Basel III that suggested an effective date for institutions to comply of Jan. 1.
However, the U.S. regulators agreed Friday that “due to the wide range of views” expressed by interested institutions and others that a delay was necessary.
They did not provide a substitute effective date for the rules, arguing that they are “working as expeditiously as possible to complete” them.
The delay comes as international regulators have delayed implementation of some other bank rules. Specifically, Mark Carney, the governor of the Bank of Canada and the chairman of an international bank-regulation standard setter said in a letter that authorities from countries that are members of the group are giving themselves six additional months until mid-2013 to set up so-called “living wills” for banks to explain how they would divide assets if they fail. Read about how weak big bank risk controls are still a global concern
Based on the bank capital proposal, which implements the international accord agreed to in September 2010, banks will be required to hold the strictest form of common-equity capital at 7% of their risk-based assets, up from 2% currently. The international agreement called for the regulation to be phased in between January 2013 and January 2019. However, the U.S. regulatory delay indicates that U.S. banks won’t start phasing in its rules starting in January 2013.
The largest global financial institutions are required by a global agreement to hold additional capital buffers of between 1% and 2.5%. The Financial Stability Board, the global standard setter under Carney’s oversight, last week released a revised list of banks that will need to hold additional capital. For the first time, the board also identified how much more money each will need to hold, putting them in four different categories.
Based on the rankings, J.P. Morgan, Citigroup, Deutsche Bank AG DB -1.76% and HSBC Holdings PLC HBC -0.29% will likely need hold much more extra capital of 2.5% each. Read about how B. of A. and Wells rise in global ranks
In June, the Fed said that some institutions had a long way to go to meet the capital rules. The largest 19 U.S. bank holding companies would have a capital shortfall of $50 billion, if the Basel III capital buffer rules proposed Thursday were to be made effective immediately, a Fed official said at the time.
The delay comes as Wayne Byrnes, the head of the Basel Committee on Banking Supervision, earlier this week reportedly said that the Basel III bank capital rules are critical to nursing the international financial system back to health and that more is needed.