WASHINGTON – A group of international central bankers agreed Sunday that the international Basel Committee should not significantly increase existing capital levels as it finalizes the remainder of the Basel III accords.
The Group of Central Bank Governors and Heads of Supervision, or GHOS, said after a meeting on Sunday that the group, which oversees the Basel Committee on Banking Supervision, endorses the "broad direction" of the committee's ongoing work, particularly as it pertains to final risk-weighted capital requirements. The group said it "discussed the Basel Committee's ongoing cumulative impact assessment and reaffirmed that, as a result of this assessment, the Committee should focus on not significantly increasing overall capital requirements."
GHOS Chairman Mario Draghi, who is also the president of the European Central Bank, said that "finalizing the committee's post-crisis reforms will complete Basel III and help restore confidence in banks' risk-weighted capital ratios."
Banks have been wringing their hands in anticipation of the final Basel III risk-weighted capital rules for years, with some fearing that the push for ever more prescriptive risk weightings and capital requirements amounts to a new policy direction not envisioned by Basel III, thus giving the final rules the moniker
Mark Carney, governor of the Bank of England and head of the Financial Stability Board, a committee linked to both Basel and the Group of 20 industrialized nations, said in an Aug. 31 letter to the G-20 that he expected Basel's work on risk weightings to be complete by early 2017, and that the committee is committed "to not significantly increasing overall capital requirements across the banking sector."
The Federal Reserve has generally favored more stringent capital rules, having included a supplementary leverage ratio to its capital standards in excess of the 3% standard Basel called for. But on Sept. 9, Fed Gov. Daniel Tarullo, who heads the agency's committee on supervision told CNBC that, while he understands "why some people in the industry thought this might have been a Basel IV-like effort," the committee did not set out to increase capital and he believes ultimately will not.
"The Basel Committee as a group agreed that the outcome of this exercise should not be a significant increase in capital requirements across the board, and I think what the Basel Committee may have learned is that some of the proposals may have moved in that direction," Tarullo said. "I believe there is an effort to hew to the original purpose of the adjustment of risk weights without increasing overall capital requirements."
