Global banking watchdog to crack down on ‘window dressing’ by big lenders

GLOBAL banking regulators proposed measures on Thursday (Mar 7) to crack down on “unacceptable” makes an attempt by the world’s greatest banks to recreation guidelines in a bid to keep away from heavier capital necessities.

About 30 globally systemic banks (G-SIBs), corresponding to JPMorgan, HSBC, BNP Paribas and Morgan Stanley, should maintain extra capital than smaller home friends, based mostly on a spread of things, which determines which “bucket” they’re slotted into, and due to this fact how a lot additional capital they need to maintain.

The guidelines had been launched a decade in the past after many lenders had been bailed out by taxpayers within the world monetary disaster.

“The proposed revisions aim at constraining banks’ ability to lower their G-SIB scores through window-dressing,” the Basel Committee mentioned in an announcement.

The intention is to cease “regulatory arbitrage behaviour” that seeks to briefly cut back banks’ perceived systemic footprint across the reference dates used for the reporting and public disclosure of G-SIB scores.

“This will be achieved by requiring banks participating in the G-SIB assessment exercise to report and disclose most G-SIB indicators based on an average of values over the reporting year, rather than year-end values.”

The proposals are out to public session till Jun 7.

“The Committee sees the benefits of a wide application of the revisions to all banks participating in the G-SIB assessment exercise, but it is also seeking feedback on options that would apply those changes to a narrower set of banks to reduce the reporting burden,” the committee mentioned.

Basel is proposing a begin date of January 2027 for the proposed adjustments.

Banking regulators from the world’s most important monetary centres are members of the Basel Committee and decide to making use of agreed guidelines of their nationwide handbooks for lenders.

The Bank for International Settlements in Basel, Switzerland, the place the Committee is predicated, mentioned in a 2021 paper that as much as 13 banks within the European Union would have confronted extra intense supervision and better capital necessities within the absence of window dressing.

The committee revealed a research on Thursday on how implementation of its G-SIB guidelines have advanced over the previous decade, saying it confirmed that the banks have seen their function shrink throughout all classes of systemic significance.

“G-SIBs appear to have adjusted their balance sheets after the introduction of the framework,” the research mentioned. REUTERS