Banks globally will have to hold more capital in the future as a cushion against losses, the Basel Committee on Banking Supervision said, broadening a revamp of rules in response to the financial crisis.
Lenders will be forced to build up capital buffers during growth periods, the Basel, Switzerland-based panel of central bankers and regulators said in a statement On Thursday, as part of an overhaul to be developed next year. Policy makers have called for the move after such rules helped Spain and other countries avoid some of the impact of the credit crunch.
“The level of capital in the banking system needs to be strengthened to raise its resilience to future episodes of economic and financial stress,” the 13-country committee said. The review will bring requirements “...higher than the current Basel II framework.”
The action adds to a global review of rules after banks and insurers racked up more than $1.2 trillion of losses and writedowns in the financial turmoil. Capital won’t be raised immediately as policy makers encourage lending to fight the deepest economic contraction since World War II.
The delay to an across-the-board capital increase is welcome, as “...an important signal for crisis management in the current situation,” Bundesbank vice-president Franz-Christoph Zeitler said in an e-mailed statement. The decision “...counters the pro-cyclicality of capital requirements originating from markets.”
The German central bank and the German financial regulator, BaFin, are members of the Basel Committee, along with authorities from the US, Japan, the UK, France, Canada, Italy, Spain, Switzerland, the Netherlands, Sweden, Belgium and Luxembourg.
