The Basel measures were originally intended to stave off a repeat of the 2008 banking collapse and this is the first time global regulators have tried to make banks hold enough cash and liquid investments, reported The Financial Times.
The first Basel rules began to be phased in this month, after initial agreemnet between 27 countries in 2010, but the final rule approved yesterday is far more flexible than the draft approved two years ago.
The ruling allows lenders to use a wider spectrum of assets in their buffers, including equities and mortgage-backed securities. It also offers a reduction in the size of the buffer held, following a change to the calculation methods.
Sir Mervyn King, who heads the Basel committee’s oversight group, called the agreement “a very significant achievement [and] a clear commitment to ensure that banks hold sufficient liquid assets to prevent central banks from becoming lenders of first resort”.
Industry lobbyists appear to have won the day after lobbying hard to convince regulators the draft rules would severely limit ability to lend.
