Global watchdog defers bank capital rules to 2023 due to epidemic

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LONDON — Global banking regulators said on Friday they will give banks an extra year to implement pending capital rules in order for them to focus on the fallout from the coronavirus epidemic.

The Governors and Heads of Supervision (GHOS), the body that oversees the Basel Committee of global banking regulators, said it was deferring several rules until January 2023.

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“It is important that banks and supervisors are able to commit their full resources to respond to the impact of Covid-19,” said François Villeroy de Galhau, Chairman of the GHOS and Governor of the Bank of France.

“The measures endorsed by GHOS today aim to prioritize these objectives and we remain ready to act further if necessary.”

Villeroy said banks needed to commit all their resources during the epidemic to helping the economy and ensuring that the banking system remains financially and operationally resilient.

After taxpayers had to bail out undercapitalised lenders in the financial crisis a decade ago, the Basel Committee toughened its rules under a reform known as Basel III.

Most of the package has been implemented, but some remaining elements were agreed in December 2017 and due to be introduced in January 2022.

These include a revised leverage ratio, changes to models used by big banks to work out how much capital they should hold, and changes to how much capital to hold against trading book assets like derivatives.

The “output floor” or minimum capital requirements irrespective of what an internal model comes up with, has also been delayed a year to January 2023.

They are meant to complement the initial set of Basel III rules that are already in force without significantly increasing overall capital requirements.

“The revised timeline is therefore not expected to dilute the capital strength of the global banking system, but will provide banks and supervisors additional capacity to respond immediately and effectively to the impact of Covid-19,” GHOS said in its statement.

Regulators in Europe have faced heavy lobbying by banks to water down the rules as the European Union looks to put them into EU law.

But GHOS said its members, which include the European Central Bank that regulates top euro zone lenders, unanimously reaffirmed their expectation of “full, timely and consistent implementation” of all the Basel III standards based on the revised timeline.

“Current events demonstrate once again the importance of a resilient financial system, which these reforms will help further reinforce,” it said. (Reporting by Huw Jones; editing by Marc Jones and Toby Chopra)