Basel III Delayed; Regulators, Financial Players Need More Time


U.S. Regulators announced on Friday that banks will not be asked to meet at Jan. 1 for a rule based on recommendations from the Basel Committee. The rules, meant to bolster the economy against another financial crisis, require banks to maintain 7 percent or more of risk-weighted assets.The Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corp. issued a statement suggesting it’s unlikely the Basel-designed rules will be set for next year.

The extension comes as industry participants are complaining about lack of time or clarity. U.S. regulators may be nervous about claims that such steep capital requirements could slow down economic progress in the midst of a sluggish recovery. The Financial Services Roundtable and the Securities Industry & Financial Markets Association have both publicly stated as much.

It is unclear when banks will be required to align themselves with the Basel rules. Few nations, in fact, have so far risen to the challenge.

Back to Square One on Basel?

Some, including David Stevens of the Mortgage Bankers Association, are obviously happy with the development. It may be a signal that regulators are planning to overhaul the rules.

“It is critical now that regulators re-propose Basel implementation rules that more appropriately allocate risk- weights on real estate-related assets,” Stevens said in an issued statement. “Otherwise, credit for real estate transactions will tighten and consumer and borrower costs will go up, as banks reduce their real estate lending and mortgage servicing business.”

Others, including former FDIC chief Sheila Bair, are less thrilled.

“It is important for the U.S. to exercise leadership,” Blair said in an email with Bloomberg. “We don’t want to send a signal to the world that we are backing off in any way.”

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About the Author

Felix Shipkevich
Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.