Basel Committee secretary-general William Coen has said the vast amount of post-crisis banking regulation is coming to an end, with most of the doubts about the financial industry being tackled within the year ahead.
Coen told the Financial Times (FT) “There is light at the end of the tunnel, the big pieces are there and it’s really now about getting to the finish line. We understand the importance of providing clarity and certainty and we’re working toward wrapping up as much as we can in the course of the next year.”
The Basel rules were put into place to help regulate international banking. Basel I was introduced in 1988 and focused on minimising credit risk, Basel II was introduced after the 2007 global crisis and encouraged banks to reform to a variety of regulations around capital and liquidity and Basel III draws on both the previous documents and seeks to improve the banking sector’s ability to deal with economic stress, strengthen transparency and improve risk management.
The FT reports that completion of the Basel rule book would bring a close to the unparalleled period of new bank regulation which was prompted by the global financial crisis. According to Citi analysis the world’s top banks now have $470.8bn more capital than they had in 2007 and have also made great changes to their business models and reduced risky investment banking activities.
Basel’s review of market risk rules, which has a deadline of the end of 2015 and looks at the effect of changing market prices in capital requirements for banks’ trading operations, is an area of reform that still requires explanation and because banks still require extra work carried out on this review it may delay their completion by up to nine months.
Coen told the FT that it was also his “strong inclination” to complete the review of banks’ trading rules by the end of the year. The news that the rulemaking era is coming to an end, Coen said that the Basel Comittee's focus is changing towards accessing how well the regulations have been implemented and are working. "It is the right time to step back and access how these moving parts fit togther. All indications are that mostly everyone is sticking to the rules and we're pointing out those areas where people are not."