Global regulators said on Thursday that banks in low debt countries like Australia and Denmark will get more leeway to comply with tough new liquidity rules.
World leaders agreed in Seoul last month that the Basel III bank capital and liquidity rules would be phased in between 2013 and 2018. They replace Basel II which failed to ensure banks had enough capital to withstand the credit crunch, leaving taxpayers to inject trillions of dollars to shore up the financial system.
The rules were authorized by the global Basel Committee on Banking Supervision which published its final text on Thursday.
Denmark, Australia and a few other countries have low government debt or small corporate bond markets, making it hard for banks to comply with the new requirements that the bulk of a liquidity buffer must be in the form of highly rated sovereign debt.
If you fall within that threshold, then there would be alternatives that could be used, Stefan Walter, Basel Committee Secretary-General, told Reuters.
Work on these alternatives, such as use of another country's debt or use of covered bonds, continues.
The liquidity buffer comprises a short-term liquidity coverage ratio (LCR) and long-term net stable funding ratio (NSFR).
We have made changes to the NSFR to provide for a level playing field across business models, such as retail business models versus wholesale banking, Walter said.
Analysts welcomed the greater flexibility.
I think it's going to be positive for Australian banks as there was still a strong element of apprehension -- that the liquidity standards are not going to be carved in stone means everyone can shrug and get on with their lives, said Ismael Pili, head of Asian Financials Research at Macquarie in Hong Kong.
Pili said the Basel committee was trying to please those who wanted tougher standards and bankers who say the sector must not be hit too hard.
So what they are doing is setting a set of standards everyone should be able to meet and then give national authorities the ability to add on extra measures as they see fit, he said.
Banks have warned they may struggle to meet the new requirements and keep lending to aid economic recovery but the regulators said they now had plenty of time to act.
The transition period provides banks with ample time to move to the new standards in a manner consistent with a sound economic recovery, while raising the safeguards in the system against economic or financial shocks, said Basel Committee Chairman Nout Wellink.
Walter said the text provided a sufficient level of detail so banks can start planning to implement the new rules.
Basel III will require banks to increase their Tier 1 capital ratio to 7 percent, which includes a capital conservation buffer of 2.5 percent, though many big banks are already above that level due to local supervisory demands.
The committee said its study showed that if the 7 percent ratio had been applied in December 2009 there would have been a shortfall of 577 billion euros ($768.7 billion) for the world's top 94 internationally active banks.
The Bank of Italy said on Thursday Italian banks need to boost their capital base by 40 billion euros to comply with Basel III.
(Additional reporting by Rachel Armstrong in Singapore; editing by Mike Peacock)