Global banking experts delay new risk rule over disagreements
Last minute efforts of world’s top bank supervisors and central bank chiefs to meet weekend has been put off due to grey areas in emerging new banking rules.
According to the Basel Committee on Banking Supervision, the expected rule will herald series of reforms intended to make it harder for banks to avoid the higher Basel III capital requirements that were put in place after the financial crisis.
The Central Bank of Nigeria is currently guiding Nigerian banks through the process of implementing Basel II but the stiffer new rule is expected to come on board with Basel III.
Financial Times report said the meeting has been delayed because key parts of the reforms are still not agreed. The committee works by consensus and has no formal enforcement powers against countries that fail to implement its reforms. A refrain throughout its history has been that “nothing is agreed until everything is agreed”.
The main sticking point between supervisors in the US and their European counterparts is the so-called output floor that limits the extent to which banks can use their own models to calculate the riskiness of their lending.
The floor in effect prevents them from using risk estimates that are too far below the outputs of a standardised model devised by regulators.