Sunday, August 21, 2011

Basel III to the bin

Global Bank Capital Regime at Risk as Regulators Spar Over Rules

By Yalman Onaran

Capital standards designed to fortify the global financial system are eroding as European officials, beset by a debt crisis, rewrite the regulations and U.S. rulemaking stalls.
The 27 member-states of the Basel Committee on Banking Supervision fought over the new regime, known as Basel III, for more than a year before agreeing in December to require banks to bolster capital and reduce reliance on borrowing. Now, as they put the standards into effect in their own countries, European Union lawmakers are revising definitions of capital, while the U.S. is struggling to reconcile the Basel mandates with financial reforms imposed by the Dodd-Frank Act.
“The game on the ground has changed in Europe and the U.S.,” said V. Gerard Comizio, a former Treasury Department lawyer who is now a senior partner at Paul Hastings Janofsky & Walker LLP in Washington. “The realists in Europe realized that their banks cannot raise the capital they’d need to comply. U.S. banks have reversed course and are more assertively fighting against it. The future of Basel III looks less certain now than it did when it was agreed to.”
Comment: Chaos and confusion without end. Part of it should be blamed on the economics profession whose members have become ever more incompetent over the years when they wasted the best years of their lives doing useless math and studying silly models. Before it can get better, things will get worse because incompetence is growing exponentially.

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