Emerging from the chrysalis: Reaction to the interim Basel announcement of July 2010
The Group of Governors and Heads of Supervision – the oversight body for the Basel Committee on Banking Supervision (BCBS) – announced on 26 July 2010 that it had reached broad agreement on many of the key elements of the proposed capital and liquidity reform package originally announced in December 2009. This comes shortly after the release of a consultation paper on countercyclical capital buffers.
Major themes to note are:
- The announcement confirms relief on capital and liquidity requirements from the original proposals, with scaled back rules including:
- Less restrictive definition of capital and leverage ratio;
- Less severe capital calculations for counterparty credit risk; and,
- Less restrictive liquidity requirements.
- The Committee has extended the transition period for key elements. This reflects the difficulty in finalising such a complex package and the damaging effects on the economy of a rushed transition. For the leverage ratio and the net stable funding ratio (NSFR) the timetable moves from the end of 2012 to a transitional period with final implementation by 2018.
