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No Basel bank capital deal this weekend: central bankers
October 13, 2017 / 4:50 PM / 2 months ago

No Basel bank capital deal this weekend: central bankers

WASHINGTON (Reuters) - Global banking regulators won’t agree a deal this weekend to complete rules aimed at ensuring banks hold enough capital in a crisis, three senior central bank officials said on Friday.

The Basel Committee wants to complete its “Basel III” accord, a set of rules it began writing in the aftermath of the global financial crisis that began a decade ago.

“No deal is coming here,” one of the central bankers said on the sidelines of International Monetary Fund meetings in Washington.

France is refusing to back a compromise on the new rules unless other conditions are met, the central bankers said.

The bulk of the Basel III accord is already being applied by lenders, but one key hurdle remains to its completion.

Basel is trying to find agreement over an “output floor” that would limit the extent to which a bank’s capital requirements based on the lender’s own risk model can diverge from how they would be calculated under a more conservative model set by regulators.

Regulators have seen wide variations in how much capital banks set aside to cover the same risks, distorting competition in the sector.

A French official familiar with the talks told Reuters that France was not the only “hold-out” and that agreement was also needed on other issues as well, such as avoiding “front-loading” or forcing lenders to comply early with the new rules.

“The biggest issue is the trading activity review, which the U.S. said it won’t implement pending a review. The U.S. needs to be onboard fully in the market activity frameworks,” the French official said.

The U.S. Treasury has recommended delaying Basel’s Fundamental Review of the Trading Book or FRTB rules which tighten capital standards for trading books of banks, saying it needed recalibrating.

Basel Committee Chair Stefan Ingves said on Thursday the floor remained the final hurdle to a deal.

France also wants reassurances from Basel that is has no “Basel IV” or new capital-heavy reforms up its sleeve, the official said.

Reporting by Balazs Koranyi; Writing by Huw Jones; Editing by Mark Potter

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