Global Bank Capital Regime at Risk as Regulators Spar Over Rules
By Yalman Onaran
Capital standards designed to fortify the global financial system are eroding as European officials, beset by a debt crisis, rewrite the regulations and U.S. rulemaking stalls. The 27 member-states of the Basel Committee on Banking Supervision fought over the new regime, known as Basel III, for more than a year before agreeing in December to require banks to bolster capital and reduce reliance on borrowing. Now, as they put the standards into effect in their own countries, European Union lawmakers are revising definitions of capital, while the U.S. is struggling to reconcile the Basel mandates with financial reforms imposed by the Dodd-Frank Act. U.S. regulators may be tempted to skip Basel altogether, said Karen Shaw Petrou, co-founder of Federal Financial Analytics Inc., an advisory firm in Washington. “Dodd-Frank already takes care of the most important elements of the financial crisis, so why should we try to
incorporate a set of rules into which big holes are already being carved?” Petrou said.