Basel Committee’s New Proposals

The Basel Committee on Banking Supervision have released consultative proposals for changes in international banking regulations. Summaries and two detailed documents are available here. I haven’t had the time yet to read these in detail but it’s worth flagging them for people because the proposals put forward in these documents are likely to have an important impact on the future of the Irish banks.

4 replies on “Basel Committee’s New Proposals”

Jon Ihle has a piece about this in the Tribune

First guess is 5.1 bn in capital required just because of the deferred tax loss, pension short-fall, buttons and washers requirements…

Note, this will be in addition to NAMA-based recapitalisation and, I believe, still only keeps the banks at 4% tier 1 core equity (or ‘money’ as the rest of us might call it). The new standard for leverage (i.e. money) seems to be set at about 12-1 (8%) so there’s a fair amount of deleveraging required, it seems.

There’s lots of other interesting stuff in Basel III, if it gets implemented. Particularly relating to derivatives…

We will eventually end up with one, good bank, if we want it. But only after we have poured a mighty amount of what borrowing capital we have left down the bad bank drain!

This is a disaster!

interestingly it sounds like they’ve solved everything, oddly there is no mention of the result of the conversation on counter-cyclical capital reserves because it was a stand off between supervisors and central bankers. All of the models tend to break when you have extremes of stress so the prevention needs to be done on the way up, any progress is progress but without some form of limiting acceleration on capital requirements when balance sheets grow rapidly misses the point to a degree (imho).

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