Banks get reprieve on new rules

January 7, 2013: 12:53 AM ET
basel
Banks have been given more time to meet new capital requirements.
HONG KONG (CNNMoney)

International banks won a concession Sunday from the Basel Committee on Banking Supervision, which relaxed rules for lenders that had been proposed in hopes of preventing another global financial crisis.

The rule change affects the "liquidity coverage ratio," a minimum standard set by regulators as part of the Basel III accord. Banks will now have more time to comply with the rule, and the standard has been eased.

Tougher capital requirements are considered a key step toward making banks safer and avoiding future taxpayer bailouts.

The decision comes after years of pressure from banks, which view the elevated capital requirements as onerous. Opponents of the higher standard have also argued that the capital requirements will limit access to credit at a time when lending is needed to boost economic growth.

The changes announced Sunday will delay full implementation of of the liquidity coverage ratio until 2019 -- a four-year extension. The ruling also expands the definition of "high quality liquid assets," which should make it much easier for banks to comply with the regulations.

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The liquidity coverage ratio, in theory, should reflect the number of assets a bank would need to survive a severe 30-day credit crisis.

Related: Fed proposal would boost bank safety cushions

Despite the decision to relax requirements, Bank of England governor Mervyn King said the agreement is "very significant" and that "for the first time in regulatory history, we have a truly global minimum standard for bank liquidity."

Yet the implementation of Basel III rules has proved problematic. Many banks have not moved quickly to boost capital reserves, drawing rebukes from regulators and governments.

Capital cushions have come under scrutiny again in recent months, as Spanish banks required bailouts and JPMorgan Chase, thought to be one of the best-run banks on Wall Street, disclosed it had lost billions on a series of bad bets.

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