Americans for Financial Reform voiced concern on Monday regarding the Basel Committee on Banking Supervision’s decision to delay implementation of and reinterpret a rule requiring banks to hold additional capital to buffer against economic downturn.
The Basel Committee struggled throughout the past year to revise Basel III’s liquidity coverage ratio, which would force financial institutions to hold enough easy-to-sell assets to make it through a 30-day credit crunch, Bloomberg reports.
While the draft version of the measure mandated that the rule would take effect January 1, 2015, the deal reached by the Basel Committee mandates that banks only have to meet 60 percent of the LCR requirements by 2015. Banks will also be able to choose from an increased number of approved assets, including securitized mortgage debt and equities, as they build their liquidity buffers.
“In sum, more than four years after the crisis, international regulators are floundering for answers and seem unable to take on the special-interest might of the financial sector,” AFR said. “Along with the weak provisions on capital under international rules, this decision on liquidity bolsters the case for U.S. regulators to add tougher requirements on top of the Basel framework, in order to do what is necessary to ensure the safety of the U.S. banking system.”
Basel III rules were developed as part of an effort to minimize risk to and ensure stability in the global financial system following the 2008 financial crisis, in which governments around the world were forced to bail out failing financial institutions.