Central Bank Chiefs Said to Seek Basel Liquidity Rule Deal

By Jim Brunsden

Global central bank chiefs and regulators will next month seek to resolve clashes on a liquidity rule after the Basel Committee on Banking Supervision failed to clinch a full deal on the controversial measure, according to two people familiar with the situation. The top officials may meet as soon as Jan. 6 in the Swiss city to thrash out a compromise on the so-called liquidity- coverage ratio, that central bankers including European Central Bank President Mario Draghi have warned may choke interbank lending and stifle economic recovery. Basel members failed to broker an accord on all parts of the LCR during talks last week, said the people, who asked not to be identified because the negotiations are private. Stumbling blocks included the list of assets that banks may use to satisfy the rule and whether the introduction of the standard should be delayed beyond its planned 2015 start date, the people said. “Positions may be narrowing, but the Basel meeting was so fractious that the LCR remains a chasm from which a final standard has yet to emerge,” Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc., said in an e-mail. “At this point, I think an LCR will emerge from Basel in watered-down, very compromised form if only to keep up hopes of a global bank-regulatory framework,” she said.