Basel III won't materially alter bank ratings - S&P

LONDON Thu Mar 4, 2010 8:16pm IST

Related Topics

LONDON (Reuters) - Proposed new rules on capital that could force banks to raise funds or cut capital ratios should not have a material impact on credit ratings for banks, Standard & Poor's said on Thursday.

The proposals, dubbed Basel III, are aimed at increasing the quantity, quality and transparency of capital held by banks, and will come into effect by the end of 2012.

"At this early stage, we do not expect that Basel III, once implemented, would likely have a material impact on our bank ratings, which are partly predicated on capitalization being strengthened before governments reduce their support of the banking system," said S&P's credit analyst Richard Barnes.

Banks may need to conserve capital, perhaps by constraining dividends, or adapt their business models with selected disposals in response to the new rules, S&P said in a report.

S&P said it was supportive of the proposals, which were "a sensible response to shortcomings in the current regulatory approach". It has also been critical of inconsistencies in application by national regulators.

Among the reforms, a proposal that various items should be deducted from common equity would probably have a "significant impact on most banks". This includes a requirement to fully deduct pension fund deficits.

S&P said the effectiveness of the Basel III reforms will crucially depend on the final definition of a leverage ratio. The proposals set out a number of options for calculating the ratio, which S&P said appeared relatively conservative.

Barnes said over time, Basel III might positively influence its ratings, "if it contributes to greater resilience to future shocks and the industry is able to transition smoothly to the strengthened capital and liquidity requirements."

(Reporting by Steve Slater, editing by Will Waterman)

(For more news on Reuters Money visit www.reutersmoney.in)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Adani Project

Adani Project

Australia approves Adani's $16 bln Carmichael coal project  Full Article 

India-U.S. Talks

India-U.S. Talks

Kerry to woo Modi's India, but quick progress unlikely  Full Article 

Paring Debt

Paring Debt

Jaiprakash to sell hydro plants to Reliance Power  Full Article 

Nifty Falls

Nifty Falls

The broader index hits lowest in nearly a week on profit taking  Full Article 

Mideast Conflict

Mideast Conflict

U.N. Security Council calls for humanitarian ceasefire in Gaza  Full Article 

Market Eye

Market Eye

Foreign investors prefer Indian cyclicals, utilities - Macquarie  Full Article 

Debt Investment

Debt Investment

India's FII debt limit hike credit-positive, says Moody's  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage