[ by Howard Haykin ]

Global banking regulators intend to overhaul capital rules for assets on banks’ trading books, as well as reinforce safeguards against excessive risk taking in the next (third) wave of rule changes.  Always mindful of the 2008 financial crisis, the Basel Committee on Banking Supervision also will review capital rules for securitized debt, and seek to reduce banks reliance on assessments issued by credit-ratings companies - that, according to Wayne Byres, the group’s secretary general, during a Tuesday speech in the Swiss city.

Mr. Byres added that, “There is more to be done. We have not yet completed the full set of policy reforms.”

Facing 1/1/13 Deadline. Nations are struggling to meet a January 1, 2013, deadline for implementing an overhaul of bank capital rules that had been agreed on by the Basel committee.  Known as Basel III, the measures would more than triple core reserves that lenders must hold against losses, compared to current international rules. Full compliance from 2019.

Yet, only 8 of the Basel committee’s 27 member nations so far have issued their final rules for applying Basel III, according to the Financial Stability Board.   While “Implementing Basel III is essential, but it must be accompanied by other measures and reforms so that a truly healthy banking system is secured for the future,” Byres said.

Large Exposure. According to Byres, the Basel group will seek views on updating so-called large exposure rules that cap the amount of business a bank can do with any single counterparty.  It also will issue “detailed proposals, as well as undertake an impact study on the capital rules that apply to lenders’ trading books."

The measures follow both the publication of Basel III and an earlier set of rule-changes, known as Basel 2.5, that was agreed on in 2009.

Byres said that the Basel committee is working to finalize a draft liquidity rule for lenders that would force them to hoard enough easy-to-sell assets to survive a 30-day credit squeeze.  The group hopes to announce the final form of the standard in early 2013. 

For further details, go to:  [Bloomberg, 11/6/12].