Regulators to set post-crisis rules for capping bank risk-taking
By Huw Jones
LONDON (Reuters) - Regulators decide this week how banks should set a limit to the risk they take onto their balance sheets, with investors likely to pressure lenders to comply before formal implementation in 2018.
Banks will be forced to hold more capital and cash as part of the world's main regulatory response to the financial crisis, Basel III.
The Basel Committee on Banking Supervision meets on Tuesday to finalize the method for working out a leverage ratio, which measures total non-risk-weighted assets to capital.
World leaders have already agreed the ratio should be set at 3 percent, meaning capital can be leveraged at no more than 33 times.
"Once the template is issued, the market is going to expect firms to disclose the information ahead of the regulatory timetable," said Richard Barfield of PwC consultancy.
As lenders seek to bolster their reputations after years of crisis and scandal in the sector, many banks have already met the capital adequacy levels set out in Basel III that are not due to be implemented in full until the start of 2019.
"Banks will also want to demonstrate they are meeting the leverage ratio," Barfield said.
However, regulators still have to decide how to square differences between U.S. and international accounting conventions, notably in assessing risks on holdings of derivatives. Continued...