Unlike Last Effort, New Basel Process Zips Along

By Donna Borak

While the Basel II process dragged on for years, international and domestic regulators appear intent on delivering a new set of capital and liquidity standards on time by yearend. Although some were skeptical when the Group of 20 industrialized nations pledged to agree to higher standards by their upcoming meeting in November, the Basel Committee on Banking Supervision has already made significant progress toward that goal. It released revisions last month to its December 2009 proposal, and is set to unveil later in August its economic impact assessment on new capital rules. The panel is expected to put forth finalized calibration and phase-in agreements by its next meeting in September. Among the biggest changes in the plan was an international agreement that a global ratio should be enacted. The committee proposed a minimum leverage ratio of 3% for a trial period from 2013 until 2017 to assess how well it works. A final cap could be effective as early as 2018. Such a level is less stringent than U.S. rules. Karen Shaw Petrou, a partner at Federal Financial Analytics Inc., warned that such a prolonged transition period could inevitably make the proposal “irrelevant.” “When a final rule has a 2018 deadline, quarter-by-quarter planners put it aside for another day,” Shaw Petrou said. “Even longer-term planners … discount it because so delayed a deadline seeds hope that a rule will be reversed.”