Fed Governor Sarah Bloom Raskin: “Time of the essence” in implementing Basel III

Sarah Bloom Raskin

Sarah Bloom Raskin

Federal Reserve Governor Sarah Bloom Raskin said on Thursday that “time is of the essence” in moving forward with Basel III capital rules.

During a speech prepared ahead of Ohio Bankers Day, Raskin said despite all the action in Washington, the country has yet to address its vision of “what kind of financial system…to foster or preserve.”

“While we focus on the difficult task of implementing a wide range of rules, a number of questions about the industry remain, questions that we must shift our full focus to once the post-crisis work is near completion,” Raskin said. “We have to address these…questions if we hope to envision a post-crisis financial regulatory system that supports a strong, dynamic and diverse financial system.”

Raskin stressed the importance of timeliness in implementing Basel III capital reforms, saying that while it is important to get the rules right, “this goal must be balanced with the costs imposed by delay.”

“Lending decisions and funding plans today are shaped by perceptions of business conditions in the future, and those conditions include the details of the final regulatory capital framework,” Raskin said. “It seems obvious to me that uncertainty over that framework is weighing on the balance sheets of banks that will be affected by the rules… While Basel III calls for full implementation by 2019, it also envisions a transition that must start years earlier. Since the transition to the new rules will be gradual, with some elements of the rules proposed to come into effect earlier, the sooner that regulators finalize the rules, the sooner banks will be able to incorporate those rules into their capital planning efforts.”

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