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US not ready for Basel III bank rules: Treasury

10 november 2012, 18:31
Photo courtesy of ink-bonn.de
Photo courtesy of ink-bonn.de
The US Treasury announced Friday that it would not implement the Basel III rules for strengthening banks on January 1, saying the banks were not yet ready to meet the tougher capital standards, AFP reports.

The delay comes as US banks have argued that the new capital rules will put them at a disadvantage to global competitors, especially from Europe.

"Many industry participants have expressed concern that they may be subject to a final regulatory capital rule on January 1, 2013, without sufficient time to understand the rule or to make necessary systems changes," the Treasury said.

The Treasury said that US regulators who are members of the Basel Committee on Banking Supervision "take seriously our internationally agreed timing commitments regarding the implementation of Basel III."

The regulators "are working as expeditiously as possible to complete the rulemaking process," it said.

But the Treasury did not give a new date for when it expected the US domestic rules in support of Basel III can be completed and implemented.

US banks have fought to delay the application of the new Basel standards, which raise the requirement for higher-quality capital to be held by the banks.

Basel III sets the minimum for banks' common equity holding at 7.0 percent of risk-weighted assets, up from 2.0 percent.

The new rules also demand improved risk coverage, especially for complex illiquid trading activities.

The Basel Committee set a January 1 deadline for all countries and jurisdictions to have their own regulations in place to meet the new standards.

By last month, only eight of 27 following the Basel process had published final rules, including China, Japan, India and Switzerland.

US banks cheered the Treasury's announcement and said they want changes to the US regulations being drafted to meet Basel III standards.

"This is a positive development, and hopefully signals that the regulators are rethinking their problematic Basel III rule and are going back to the drawing board," the Mortgage Bankers Association said in a statement Friday.

"It is critical now that regulators re-propose Basel implementation rules that more appropriately allocate risk-weights on real estate-related assets," they said.

By Paul Handley

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