Bank regulators propose tougher trading book rules

Reuters

LONDON, Oct 31 (Reuters) - Banks using bespoke models fordetermining how much capital they hold to cover trading bookrisks should also use a standardised approach as a backstop,global regulators said on Thursday.

The Basel Committee of banking supervisors from nearly 30countries published a second round of consultation on reforminghow risks on trading books could be added up after finding widediscrepancies among banks.

Hawkish policymakers in Britain and the United States havesaid that Basel's current system of using in-house models toassign weightings to risky assets to determine capital levels istoo complicated and easily gamed.

"This is achieved by establishing a closer calibration ofthe two approaches, requiring mandatory calculation of thestandardised approach by all banks, and requiring mandatorypublic disclosure of standardised capital charges by all banks,on a desk-by-desk basis," the committee said in a statement.

The committee is also considering the merits of introducingthe standardised approach as a floor or surcharge to themodels-based approach.

"However, it will only make a final decision on this issuefollowing a comprehensive quantitative impact study, afterassessing the impact and interactions of the revisedstandardised and models-based approaches," the committee said.

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