Regulators Fall Behind On Formulating Rules For Basel III Bank Reserve Requirements And Postpone January 1 Deadline

Monday, November 12, 2012 08:30
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Regulators Fall Behind On Formulating Rules For Basel III Bank Reserve Requirements And Postpone January 1 Deadline

Tags: banks | Federal Reserve | regulation

The Basel III requirements for banks to increase their loan loss reserves that were supposed to come into effect on January 1 have been postponed.

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Regulators are continuing to review comments on the measure designed to reduce the likelihood of a repeat of the 2008 financial crisis.
 
But most Basel committee member nations are behind on completing their work on the new rules.
 
Industry participants have been concerned that they would not have sufficient time to comply with the new rules by the January deadline. The US proposal mandates a 7% reserve against risk-weighted assets.
 
David Stevens heads the Mortgage Bankers Association and says the rules would more be more appropriate if applied to risk-weighted real-estate assets.
 
Otherwise, they will only serve to tighten credit for real estate transactions and increase consumer borrowing costs.
 
Other industry participants feel the US version of Basel III is too complex and are targeted primarily toward large, internationally active banks. This will cause undue burdens for smaller banks.
 
Representatives from the OCC, the Fed, and the FDIC will participate in a Senate Banking Committee hearing on the rules on November 14.

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