Basel Compromise Means Higher Capital Ratios, Time to Comply
by - Sep 12, 2010 8:52 PM GMT-0300
Regulators looking to rein in the sort of risk-taking that caused the last financial crisis reached a compromise in Switzerland yesterday that more than doubles capital requirements for the world’s banks while giving them as long as eight years to comply.
The Basel Committee on Banking Supervision will require lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress. Banks that fail to meet the buffer would be unable to pay dividends, though not forced to raise cash.
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Comment: Even after when the new Basle criteria will be implemented, we still will have a fractional reserve system with all of the same consequences we have been suffering from in the past.
The Basel Committee on Banking Supervision will require lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress. Banks that fail to meet the buffer would be unable to pay dividends, though not forced to raise cash.
Full text
Comment: Even after when the new Basle criteria will be implemented, we still will have a fractional reserve system with all of the same consequences we have been suffering from in the past.
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