Basel Chair urges banks to fully implement capital rules as soon as possible

By Thomson Reuters Apr 18, 2024 | 5:12 AM

MADRID (Reuters) – Basel Committee Chair Pablo Hernandez De Cos on Thursday urged banks to fully implement the so-called Basel III international capital rules “as soon as possible” across jurisdictions to ensure financial stability.

The Basel Committee of banking regulators from around the world is facing pushback from banks in the United States in particular on the final leg of ‘Basel III’ post-financial crisis bank capital reforms to prevent bailouts of struggling lenders by taxpayers.

“Strong common minimum standards of regulation and supervision are crucial to ensure financial stability in each and every country,” De Cos, who is also heads the Bank of Spain, said as part of the central bank’s supervisory report.

Last year saw the forced takeover of Credit Suisse, the first globally systemic bank to fail since the global financial crisis of 2007-2009, and the demise of several U.S. banks, such as Silicon Valley Bank.

U.S. banks argue that the “end game” Basel rules will dent lending to the economy, while lenders in the European Union have also obtained temporary waivers from some of the rules.

Basel is already turning to tackling new risks, such as the social-media fuelled runs witnessed during the banking turmoil that began in the United States in March last year.

Bank of Spain Deputy Governor Margarita Delgado said that the management of credit risks, including counterparty risk, as well as liquidity and interest rate risk, “is key, as we have seen in the U.S. banking crises of spring 2023.”

Banks in the European Union face closer scrutiny of how they assess the impact of interest rate changes on their books.

Delgado said lenders also needed to have solid financing plans to withstand short-term liquidity shocks, emphasizing that a significant rise in net interest income at European lenders “cannot be considered sustainable” as the repricing of loan portfolios was almost completed.

(Reporting by Jesús Aguado, editing by Andrei Khalip)