A planned international limit on bank indebtedness will be on the agenda of every meeting of the Basel Committee on Banking Supervision this year as regulators seek to wean lenders off their addiction to debt, according to three people familiar with the talks.
Regulators are preparing to fight lenders over the details
of the so-called leverage ratio as they seek to toughen rules on
the minimum amount of capital they must use to back their
investments. The Basel group, which brings together supervisors
from 27 nations, will meet in the Swiss city tomorrow, according
to the people, who asked not to be identified because the
meetings are confidential.
Concerns over how banks calculate reserves has led U.K.
bank regulator Adair Turner and U.S. Federal Deposit Insurance
Corp. board member Jeremiah Norton to call for tougher leverage
ratios. Global supervisors in 2010 included a draft leverage
ratio in an overhaul of rules, known as Basel III, drawn up in
response to the financial crisis that followed the collapse of
Lehman Brothers Holdings Inc.
“Early on, banks did not see it as such a big danger, or
as a priority for lobbying, because it looked less likely to be
implemented in the EU than other parts of Basel III,” Philippe
Lamberts, the lawmaker leading the work on the Basel III rules
for the European Parliament’s Green group, said in a telephone
Leverage ratios force banks to hold capital equivalent to a
percentage of the value of their assets. Such measures are
simpler than standard capital requirements as they don’t give
banks any scope to take into account the riskiness of their
investments when calculating the reserves they must hold. - Full Read: Bloomberg, Bank Debt Addiction