Don't delay new bank rules too long, Asia urges Europe

Tue Nov 27, 2012 10:22am EST
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By Rachel Armstrong and John O'Donnell

HONG KONG/BRUSSELS (Reuters) - Asian financial leaders warned Europe on Tuesday to limit any delay in stricter banking rules to months not years, fearing the United States' decision to shelve the controversial new global regime could derail it completely.

Europe is preparing to follow the United States in postponing the introduction of the Basel III reforms, EU sources told Reuters, and the delay could last six months or even longer if diplomats and lawmakers fail to break the deadlock.

"The fact is that the U.S. and euro zone are the most important regions where Basel III should have been implemented," Anand Sinha, deputy governor of the Reserve Bank of India, told a Thomson Reuters Pan-Asian regulatory summit in Hong Kong.

"It would have been very helpful, even if there is a delay, if the U.S. and euro zone could have indicated a definite timeline, that is not there."

The global accord hatched by central bankers and regulators in the aftermath of the 2008 financial crisis demands that lenders set aside more capital to cover losses such as unpaid loans. It also lays out higher standards in determining what kind of assets a bank can use to meet these capital levels.

The rules, which triple the amount of basic capital banks need to hold, are meant to be phased in over a six-year period starting in January 2013.

While a delay would be good news for small banks seeking more time to adapt, investors dislike the uncertainty.

"It's not encouraging and it won't encourage investors," said Chris Wheeler, analyst with Mediobanca. "They just want it out of the way. They want the uncertainty buried."   Continued...

The logo of the European Union and the word recession are displayed on the screen an iPad and a LCD monitor in Zenica November 16, 2012. REUTERS/Dado Ruvic