Blog article
See all stories »

Meeting the Market's Standardized Standards

Big banks lost more ground this week when a report by international regulators found that higher capital requirements would not drastically impair growth. The Bank for International Settlements in Basel stated Monday that a one percentage point surcharge increase would slow annual growth by less than 0.01 percentage points over eight years.

In short, the benefits of a buffer outweigh their damages.

“The findings contradict research commissioned by large banks on the impact of capital requirements on economic growth and deal a blow to the financial industry's arguments against tougher rules,” said The Wall Street Journal’s Sara Schaefer Muñoz. “The tug-of-war between banks and regulators over post-crisis financial rules has so far moved in the watchdogs’ favor with banks largely failing to upend the tougher proposals in the U.S. and Europe.”

Further anchoring regulators’ end of the rope, the Basel Committee on Banking Supervision’s chairman heralded a global initiative to compel financial institutions to increase their liquid asset reserves. The group intends to top its agenda with standardized implementation of Basel III reforms, according to Reuters.

Standardized and comprehensive seem to be the solutions du jour, and it doesn’t end with Basel. American musings about the 2008 Troubled Asset Relief Program’s potential efficacy in Europe have finally made their way across the Atlantic.

“This week eurozone leaders signaled that they are -- belatedly -- moving that way,” Gillian Tett wrote in the Financial Times, pointing out differences and adding a warning. “Political sensitivities make it tough for European regulators to focus on the visible piece of the stress tests that markets really care about and understand.”

Time will tell if such troubling discord will come to pass. For now, the U.S. markets seem to enjoy talk of standardization, if not emulation.

U.S. stocks continued their rise Monday following an announcement by German and French leaders to recapitalize the eurozone’s banks and attend to its debt crisis by month’s end, according to The Wall Street Journal. And to do so all in (what else?) a “comprehensive package.”

3795

Comments: (0)

Now hiring