| LONDON, Sept 13
LONDON, Sept 13 The world's top bank regulators
on Tuesday defended reforms they plan to finalise this year,
saying the aim was not to raise capital levels but rather to
make lenders use similar yardsticks to assess risk.
The Basel Committee made up of regulators from nearly 30
countries has come under intense pressure from the banking
industry and European governments to rein in the reforms it is
"Why are we doing this work? It's not to increase capital,"
Basel Committee Secretary-General William Coen said before a
two-day committee meeting starting on Wednesday.
"If we wanted to increase capital, then that is far easier
than what we are doing at present," he told reporters.
Coen said the changes were designed to prevent the wide
variations in the way banks use models to assign risk weightings
to assets such as loans, which in turn determines how much
capital the lenders should hold.
But banks have dubbed the new rules "Basel IV", or a step
change in capital requirements compared with the Basel III
global framework put in place after taxpayers had to rescue
banks during the 2007-09 financial crisis.
Deutsche Bank has said "Basel IV" unsettles investors and
makes it difficult for banks to plan ahead.
The Basel Committee has said lenders should wait until the
final rules are published, and Coen hinted on Tuesday that
changes were likely as the committee typically revisits
proposals in light of public consultations and field testing.
"This is the way the process is unfolding," Coen said.
Regulators suspect "outliers" - banks whose risk weightings
diverge considerably from the industry average - are
manipulating the models they use to assess risk to trim their
own capital requirements.
Coen said the planned changes would restore confidence both
in bank capital ratios and in the rules themselves.
The European Union, however, is worried the new rules could
lead to a big increase in capital requirements for its banks
whose lending is the major source of funding for the economy.
Basel's oversight body said on Sunday the work on the new
rules was going in the right direction and it had reminded the
committee of the need to ensure no significant increase in
There is, however, no set definition of what this means, and
while some big banks may face increases in capital requirements,
many will likely see little change.
The reforms, which complete Basel's post-crisis revamp of
its capital rules, cover elements such as risks from credit or
loans, that make up the bulk of a bank's capital requirements.
Basel has yet to debate when the rule changes would come
into effect. A 2019 deadline is seen as the earliest possible,
while a later date may be more likely.
(Editing by David Clarke)