World Regulators Agree To Raise Capital Requirements To Strengthen Banking Industry

Remember the old National Lampoon cover: "Buy this magazine or we'll shoot this dog"? I think of that every time the most reasonable banking regulations are met with a warning from the bankers that the new requirement will lessen the amount of money

Remember the old National Lampoon cover: "Buy this magazine or we'll shoot this dog"? I think of that every time the most reasonable banking regulations are met with a warning from the bankers that the new requirement will lessen the amount of money available to lend.

Which is not really all that persuasive, considering they're not lending anyway!

BASEL, Switzerland — The world’s top bank regulators agreed Sunday on far-reaching new rules intended to strengthen the global banking industry and shield it against future financial disasters.

The new requirements more than tripled the amount of capital banks must hold in reserve, an effort to bolster their financial strength and provide a cushion against potential losses. They come two years after the collapse of Lehman Brothers set off a worldwide banking crisis that required billions in government bailouts. But the rules could also reduce bank profits, strain weaker institutions and raise the cost of borrowing for businesses and consumers.

The rules require banks to raise the amount of common equity they hold — considered the least risky form of capital — to 7 percent of assets from 2 percent.

“The agreements reached today are a fundamental strengthening of global capital standards,” Jean-Claude Trichet, president of the European Central Bank and chairman of the group, which included financial officials from 27 countries.

While some banking groups have claimed the rules will require them to curtail credit and cripple economic growth, Mr. Trichet took the opposite view, saying in a statement that the rules’ “contribution to long-term financial stability and growth will be substantial.”

[...] The recommendations by the group, which includes Ben S. Bernanke, chairman of the Federal Reserve, are subject to approval in November by the G-20 nations and then enactment by individual nations before they become binding. The group set a deadline of Jan. 1, 2013, for member nations to adopt the rules, known as Basel III.

Some bankers expressed support for the new regulations. “Banks will unarguably be safer institutions,” said Anders Kvist, head of group treasury at SEB, a bank based in Stockholm that has operations throughout Europe.

Many banks, however, have warned that the new rules would tighten the credit available to borrowers.

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