Canada bank regulator warns on Basel supervision

Wed Nov 23, 2011 7:49pm EST
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By David Ljunggren and Randall Palmer

OTTAWA (Reuters) - Global regulators must step up supervision of how so-called Basel III bank standards are implemented in order to ensure a level playing field among lenders, the head of Canada's banking watchdog said on Wednesday.

Julie Dickson, who heads the Office of the Superintendent of Financial Institutions (OSFI), said the regulator has been emphasizing internationally that capital rules must be accompanied by "intensive supervision" to be effective and that there was an effort underway to increase scrutiny.

"It's been agreed that we're going to try to assess whether global banks, if given the same portfolio, would come up with the same capital," she told the Senate Standing Committee on Banking, Trade and Commerce.

"That's going to be very difficult to do, but it's on the radar screen and a huge amount of effort will go into that in the coming months."

Dickson said she has told Canadian banks that they should be prepared to meet the new standards, which toughen rules on how much capital and liquidity they must hold, by the first quarter of 2013 rather than 2019 as laid out by the agreement.

"Canadian banks are currently well-positioned to meet or exceed this expectation," she said.

But she acknowledged that there were questions as to whether or how quickly some other countries would implement the rules, due the weak economic outlook in Europe and the United States.

She said that was why Basel III has a very long transition period, but she added: "We're very, very focused on this. We want other countries to implement because that's how you get a level playing field."   Continued...