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World’s Banks Welcomes New Basel Rules

The Basel Committee, which is the regulator of world’s banking systems, has agreed on a new bank capital requirement of 7 percent, giving a sigh of relief to many financial institutions all over the globe.

The regulator also agreed to give longer lead-in time for the completion of the requirement.

Global bank regulators Basel Committee has agreed on the new bank capital rules that would require financial institutions to hold top-quality capital of around 7 percent of their risk-bearing assets.

Different banks all over the world expressed relief to the new rules, known as Basel III, which will requirement banking systems to raise funds at least 7 percent of their assets. This up from the previous requirement of 2 percent, but significantly lower than earlier expected.

The Basel Committee also agreed to give banks to long lead in period, with phase-in extending to January 2019, to ease fears that the financial lenders will have to rush raising the required capital.

The new framework, according to the European Central Bank, would help the banks to raise hundreds of billions of dollars and euros. It would also free larger and stronger banking systems with excess liquid cash capital to return some to the investors or even seek acquisitions.

Although, many analysts and investors remained wary of the new guidelines, citing the threat posed by larger international banks, which could face a capital surcharge.

The delay in the implementation also suggests that global regulators have realized that they will have to let banks to recover first, and start to lend funds to participate in the global economic recovery.

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