US banks urged global regulators at the weekend to eliminate country-to-country differences in new banking guidelines designed to minimise risks and create a level playing field for international finance.
Donald Ogilvie, head of the American Bankers Association, said big US banks with international branches should be allowed to apply the same regulatory standard using so-called Basel II guidelines both home and abroad.
On Saturday, central bank governors and regulatory heads from the G10 industrial nations approved the sweeping rewrite of global rules governing how much cash banks set aside as a buffer against risks.
"We encourage the US regulators to work with the Basel Committee and foreign regulators to institute home country supervision for transnational banks and ultimately to eliminate differences in the application of Basel II from country to country," Ogilvie said in a statement.
Allowing big banks to use the same rules world-wide would introduce huge efficiencies for transnational banks, who must now report to each national regulator using different codes.
Separately, German regulators urged banks to set to work applying the 239-page rulebook, which follows more than five years of discussions, sometimes ill-tempered, and represents the most important regulatory change to the financial sector since the original Basel Accord in 1988.
"The implementation work that has already begun in most institutions should continue quickly and be brought to a successful conclusion," said Bundesbank board member and bank supervisory head Edgar Meister in a statement.
Meister said the European Parliament would be able to review and approve the European Commission's interpretation of the Basel guidelines by the fall of this year.
Big banks using the accord's most advanced methodology have until end-2007 to put the rules into place.
The EU's interpretation of the rules would spell out in greater detail than the Basel Accord on how banks should measure risks arising from lending to small- and medium-sized businesses, Meister said.
During the years of debate over the rules, Germany often proved the intellectual sparring partner for the United States, pushing for assurances that its small-business sector would not suffer under the new risk-sensitive rules.
With the G10 endorsement now behind it, the accord now faces battles at the national level. Regulators must persuade politicians that the code will strengthen the financial system without imposing burdensome costs on the banking industry.
Tom Garside, managing director at consultancy Mercer Oliver Wyman, said the accord faced a rougher ride through the US political process than in Europe, where the EU has long made it clear that all banks must use the new rules.
Still, the degree to which banks have begun to apply the new rules varies greatly, even in Europe, with some banks embracing the switchover to a modernised system and others "just doing this because they have to," Garside said.
"If you don't have models in place now it will be pretty difficult to have things in place by 2007, given all of the use-test and validation requirements," he said.
Comments
Comments are closed.