(Adds comment from Chilean regulator)
By Huw Jones
LONDON Nov 28 Regulators should complete work
on their new bank capital rules without diluting them, otherwise
it would be harder to draw a line under the financial crisis, a
global central banking official said on Monday.
Claudio Borio, head of the monetary and economic department
at the Bank for International Settlements, a forum for central
banks, said the balance sheets of some lenders have still not
been wiped clean of bad loans nearly a decade after the
financial crisis began.
That crisis prompted world leaders to introduce tougher bank
capital requirements, known as Basel III. Regulators will seek
to complete Basel III at a meeting of the 28-country Basel
Committee, which sets the standard for global regulation, on
Monday and Tuesday in Chile.
Chile has been an observer on the Basel Committee since 2014
and the head of its SBIF banking regulatory body Eric Parrado
told reporters in Santiago on Monday that he was hopeful a deal
would be struck this week.
"The spirit is pretty collaborative," he said. "We are
optimistic that in these two days an agreement will be reached."
Remaining elements of Basel III face stiff opposition from
European Union policymakers, who are concerned they will bump up
capital requirements and crimp lending.
"Prudential authorities should complete the financial
reforms without delay, notably Basel III," Borio told a meeting
of the EU's European Banking Authority on Monday.
"And in the process, they should not succumb to the pressure
to dilute standards and should redouble efforts to repair
balance sheets," Borio added.
Despite Borio's pleas, the draft proposals originally aired
by Basel are widely expected to be rolled back after field tests
showed they would lead to big hikes in capital for some lenders.
Bank of England Governor Mark Carney and the EBA both expect
the remaining Basel rules to be scaled back significantly in
EU financial services chief Valdis Dombrovskis has
threatened to boycott the rules in the bloc if they increase
capital requirements significantly. That would jeopardise an
international approach to bank capital rules that was reinforced
after the financial crisis.
Dombrovskis struck a more conciliatory tone on Monday,
saying the EU was entering the talks in Chile with a view to
reaching a "balanced solution".
Julie Dickson, a senior banking supervisor at the European
Central Bank, said in Frankfurt on Monday the Basel Committee
had a track record of getting agreement and she was hopeful that
would happen this time.
(Additional reporting by Anthony Esposito in Santiago, Marilyn
Haigh in Brussels and Andreas Kroener in Frankfurt; Editing by
Susan Thomas and Meredith Mazzilli)