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The proposed global rules were hailed by Jean-Claude Trichet, president of the European Central Bank, as essential. |
Central bankers back new regulations
BASEL, Switzerland - Banks would have to set aside more profits as a cushion against hard times and face limits on how much debt they can run up under proposed new global rules agreed to yesterday by top central bankers and regulators.
The framework for bank supervision follows a call by Group of 20 finance officials on Saturday to tackle bank capital requirements and make sure financial institutions insure themselves better against market upheavals and economic downturns.
Central bankers said concrete proposals would be finalized by the end of the year.
“The agreements reached today among 27 major countries of the world are essential as they set the new standards for banking regulation and supervision at the global level,’’ said the European Central Bank’s president, Jean-Claude Trichet.
The measures include proposed rules on capital requirements, the introduction of a leverage ratio, and a minimum global standard for funding liquidity. Banks would have to raise the quality of their top-tier capital buffers, which must be mainly common shares and retained earnings, and disclose their make-up.
Leverage ratios limiting the amount of debt banks can run up as a proportion of their capital would be introduced and harmonized internationally, adjusting for differences in accounting, the central bankers said.
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