Global capital rules talks postponed
The next meeting of the Basel Committee of banking supervisors pushed back to October
London — Banking regulators will postpone their next meeting in another bid to agree on global capital rules, taking more time to try to overcome objections from European banks to minimum capital levels, people familiar with the talks said.
The negotiations are being closely watched by thousands of lenders, even though the rules would not come into force until 2024 or 2025.
Standard Chartered said on Wednesday it would not pay a dividend because of the regulatory uncertainty.
The next meeting of the Basel Committee of banking supervisors was set for mid-September but it is now expected in early October, the sources said.
The Basel Committee, which has been trying to reach a deal since 2016, had no comment.
Standard Chartered shares fell on Wednesday after it said it would not pay a dividend until there was more clarity on regulatory uncertainties, including the capital implications of the new Basel rules. The Basel meeting delay will give officials more time to overcome European banks’ reluctance to accept a "floor" or minimum level of capital a big bank must hold, the sources said.
Basel members such as the US want a floor equivalent to 75% of the amount standard regulatory capital calculations used by smaller lenders come up with. Europe wants a figure nearer 70%. Potential compromises include scaling back on capital elsewhere in the package if a floor of 75% is chosen.
Conversely, capital could be ratcheted up elsewhere in the package if a floor of 70% is selected, the sources said.
A floor of 72.5% would look silly but acceptable if it got the deal done, one source said.
Central bank governors such as the US Federal Reserve’s Janet Yellen, the European Central Bank’s Mario Draghi and Bank of England chief Mark Carney are pushing for a deal to allow the banking sector and regulators to move on.
The rules under discussion would complete Basel III, the world’s response to undercapitalised lenders that taxpayers had to bail out in a financial crisis that started a decade ago.
"Clearly, Europe remained united in the last [Basel] meetings. I think there is a clear awareness and understanding in different [EU] countries of what is at stake," said Frederic Oudea, CE of French bank Société Générale. "There will be further discussions…. It would be 50:50 to have an agreement at the end of the day."
Bank of France governor Francois Villeroy de Galhau said in July a floor set at 75% would hit too many European banks. Other banking sector officials say this is because European banks do not hold enough capital. Basel is also facing a growing list of members who want to delay implementing tougher capital requirements for banks’ trading books, a separate reform that has already been agreed.
Singapore, Hong Kong and Australia are delaying the rules, while the US Treasury has recommended a delay and the EU has proposed a phase-in.
It is unclear if the committee would agree to an across-the-board delay — as it did twice with new rules that require cash to be set aside against trades — or simply let each member do its own thing and risk confusion in markets.