Global bank watchdog proposes tougher regulations
ZURICH - The world’s top bank regulator said yesterday it wants to tighten rules and raise the cost of issuing and trading risky securities, giving a clear signal that supervisors are cracking down following the United States sub-prime crisis.
The Basel Committee on Banking Supervision laid out a road map for new regulations, saying it would attempt to close the gaps in the framework of global rules that were exposed by billions of dollars of shock losses in the ongoing financial crisis.
The moves will undoubtedly raise the cost of banking services, including that of issuing and owning structured, asset-backed securities, and also for trading overall.
The committee also aims to see banks secure safer sources of liquidity to keep their day-to-day operations flowing smoothly after several banks, including Northern Rock in Britain and Bear Stearns in the US, suffered crises that threatened to derail the global financial system.
“Supervisors cannot predict the next crisis, but they can carry forward the lessons from recent events to promote a more resilient banking system that can weather shocks, whatever the source,” said Basel committee chairman Nout Wellink in a statement.
The Basel committee said that it will revise the Basel II Framework - which sets minimum capital requirements for banks, as well as other measures to tighten risk management. This is aimed at setting higher capital levels for complex structured credit products such as collateralised debt obligations and other asset-backed securities. Details will be published later in the year.
In addition, a consultation paper on standards for the management and supervision of liquidity risks will be published in July.
Guidance will also be issued by next year, requiring banks to make enhanced disclosures relating to complex securitisation exposures.
Banks have lobbied hard for regulators to take a light approach, saying they aim to put their own houses in order first.
The Basel committee includes central bank and watchdog officials from the Group of Seven countries.
REUTERS, AGENCE FRANCE-PRESSE
Source : Straits Times - 17 Apr 2008
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