Global banks are close to deal on new capital rules, says French central bank chief
Tokyo — A deal to complete post-financial crisis capital rules for banks around the globe may be reached on Thursday, the French central bank governor said on Monday, indicating he is ready to accept a compromise.
France has been a key hold-out for completing the Basel 3 rules but people familiar with the negotiations have said the Group of Governors and Heads of Supervision (GHOS), due to meet in Frankfurt on Thursday, would not gather unless a deal had been informally agreed.
"I am confident we are about to finalise a fair and reasonable agreement at our GHOS meeting next Thursday," French central bank chief Francois Villeroy de Galhau said in a speech at a university in Tokyo.
While much of the Basel accord is already implemented and a final deal has been near several times, a deal this week would end years of effort to harmonise banking rules.
Villeroy, who is also a European Central Bank policy maker, said the key task was now to implement the deal and ensure regulation was not rolled back.
"Unilateral deregulation would be nothing less than a lose-lose scenario with serious consequences for the stability of the global financial system — we would be paving the way for the next financial crisis — as well as the competitive landscape for US, Japanese and European banks," he said.
This week’s compromise is expected to be about the so-called "output floor", which limits the extent to which a bank’s capital requirements based on its own risk model can diverge from how they would be calculated under a more conservative model set by regulators.
France and a few others were unhappy with the deal but sources familiar with the discussion said that a long phase-in period would be accepted to soothe their concerns.
Villeroy said increasing protectionism was a top risk to global trade.
"We, Europeans and Japanese, shoulder-to-shoulder with Canada and others elsewhere, must resolutely defend international economic relations based on commonly respected rules and multilateral institutions," he said.