By Felix Innig: Subscribe to Felix's RSS feed
July 27, 2010 9:07 PM EDT
Some of the new and stricter global rules concerning banking capital and liquidity outlined by the Basel Committee on Banking Supervision will not come into effect before 2018. The committee said it would water down proposals for new capital requirements, delaying implementation dates and relaxing the net stable funding rate, among others.
The Basel Committee, operating from the headquarters of the Bank for International Settlements (BIS) in Basel, Switzerland, agreed on Monday on a complex set of compromises to adjust a number of measures. The goal is to put in place stricter global banking regulations known as Basel III to ensure capital adequacy and liquidity in the world´s banking system. A list with all the exact changes is available on the BIS website.
The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, is meeting four times per year to work on the Basel regulation packages. The next meeting will be held in September, as the Committee hopes to finalize the capital and liquidity reform package before November, when the G-20 summit will take place in Seoul, South Korea.
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The laid out rules are not automatically binding for any country, and are merely recommendations. The Accord has to be implemented by every national regulator autonomously, but most are willing to do so to promote a stable and competitive national banking system.
The relaxation and clarification of several measures came as a surprise to many, and is seen as very beneficial to banks.
Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank said about the longer transition period: "The phase-in arrangements will enable the banking sector to meet the new standards through reasonable earnings retention and capital raising."
As a consequence, many bank stocks experienced a strong rally on Tuesday. Barclays, the U.K.’s third-largest bank, surged 7.6 percent; Lloyds Banking Group Plc advanced 8.8 percent and Royal Bank of Scotland Group Plc increased by 7.9 percent. France's Credit Agricole rallied by more than 10 percent in Paris; while Swiss bank UBS (NYSE: AG) soared by almost 9 percent in New York.
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