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Big banks are making critical risk management decisions with data that is old, incomplete or even inaccurate. This endangers the safety of the global financial system in more ways than one.
February 27 -
Banks and industry groups worry that the Financial Stability Board's "total loss absorbing capacity" proposal could disrupt capital formation while reform advocates say the rules could be strengthened even further.
February 17 -
Nearly four years after the Basel Committee published its guide and three years after JPMorgan's "London Whale," banks and the Fed still have a long way to go before operational risk can be reliably measured and mitigated.
February 11 -
WASHINGTON Federal bank regulators made a tool available on Wednesday to help banks calculate capital requirements for securitization exposures.
February 11
This article is the first in a two-part series.
The quality of an organizations leader and the tone he sets are the most important predictors of whether the organization will reach its objectives. By these measures, the Basel Committee on Banking Supervision is in good hands with recently appointed secretary general William Coen. I have gained invaluable insights into his abilities and experience over several conversations and by observing the pace at which the committee has been releasing important guidelines and finessing existing ones since he took over.
Now that the vast majority of Basel III guidelines have been finalized, Coen must focus on broader, strategic issues related to the future direction of the Basel Committee. Fortunately, from what I have seen in my conversations and communications with Coen, his sights are firmly set on increasing the safety and soundness of the global banking sector. It's important that regulators minimize the flexibility in banks' regulatory capital models and improve guidance on how banks measure and manage operational risk. I am pleased to see that Coen and the committee will be working to achieve those goals and analyzing how all the rules are now working together.
Coen's ability to work with all the members of the 27 member countries will be key in how he leads the Basel Committee. His career has equipped him with firsthand knowledge of the nuts and bolts of banking, bank examination and crafting policies. After getting his start at a large New York-based savings and loan, Coen joined the Office of the Comptroller of the Currency and later the Federal Reserve Board of Governors' bank licensing and supervision sections. In 1999, he moved to a policy role at the Basel Committee.
After three years in Basel, Coen returned to the Federal Reserve. But he was barely there four months before he was invited to join the Financial Stability Institute, which was established by the Bank for International Settlements and the Basel Committee to assist financial sector supervisors in improving and strengthening their financial systems.
Coen became deputy secretary general of the Basel Committee in 2007, at the outset of the global financial crisis. "Life at the Basel Committee Secretariat took a dramatic turn and so has the role of banking supervisors," he told me.
The biggest challenge for Coen was the sheer number of regulatory reforms that the Basel Committee initiated to respond to the crisis. The Basel Committee's traditional focus on minimum capital requirements remained a priority. But topics like liquidity, leverage ratios and capital buffers took on much greater prominence.
"A glaring spotlight was shining on us intensely," he says. "We had to react quickly and incorporate the many lessons learned into our reforms."
As Basel III nears its fifth anniversary this summer, Coen must lead the Basel Committee and numerous working groups to another important phase of reforming the global banking sector: making sure that the rules all work well together.
"The whole regulatory framework is radically different," says Coen. "We now have to take a step back and look at how all the new capital ratios, liquidity standard, and leverage ratio all fit together."
The industry has argued that the Basel III framework is incoherent a point with which I strongly disagree. But I like the fact that Coen believes that "it is a matter of good governance to analyze industry concerns and look at the calibration of all of the ratios and buffers." His approach is very useful in demonstrating to the bank industry that he is working both with regulators and banks to make sure that all the new rules do function in making the global banking sector healthier.
Mayra Rodríguez Valladares is managing principal at
