New Basel Rules To Be Phased In Over Eight Years
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Over the weekend, global bank regulators at a meeting in Basel, Switzerland reached a compromise to increase protection against unexpected losses, but the concerns over the slowing economic recovery have regulators prepared to phase in the new rules over the next eight years.
The timetable is longer than U.S. regulators had hoped for, but the move is necessitated to avoid crimping lenders and restricting access to credit for companies and consumers.
"The recovery is slow and we want to move to these higher standards in a gradual way," said Stefan Walter, secretary general of the Basel Committee on Banking Supervision. "It's a balanced approach."
The new financial regulations will eventually have significant impacts throughout the financial system, including mortgages and commercial loans, as well as the amount of capital that banks will be required to have on hand to guard against future losses. The rules are being phased in to avoid seeing the crisis that led to the taxpayer-bailouts that saw hundreds of billions of dollars pumped into the financial system.
The new restrictions could hamper the risky activities by banks that have proven to have lucrative and damaging results in the past. This could in turn cause financial institutions to cut back on lending and drive up the cost for borrowers seeking credit.
Regulators have stated that the new rules will help to avoid the costs of bailing out the financial system in the future, which will offset the diminished lending levels.
The framework and timetable for implementing the rules is expected to be laid out at a meeting of the Group of 20 leading nations in South Korea in November. The timetable could cause a lag in the amount of time for the impact of the financial reform to be felt.
Some of the changes will be implemented by 2013, while others will not be put into practice until the start of 2019. The full impact of technical changes to the definition of capital will not fully be felt until 2023.
The timetable is longer than U.S. regulators had hoped for, but the move is necessitated to avoid crimping lenders and restricting access to credit for companies and consumers.
"The recovery is slow and we want to move to these higher standards in a gradual way," said Stefan Walter, secretary general of the Basel Committee on Banking Supervision. "It's a balanced approach."
The new financial regulations will eventually have significant impacts throughout the financial system, including mortgages and commercial loans, as well as the amount of capital that banks will be required to have on hand to guard against future losses. The rules are being phased in to avoid seeing the crisis that led to the taxpayer-bailouts that saw hundreds of billions of dollars pumped into the financial system.
The new restrictions could hamper the risky activities by banks that have proven to have lucrative and damaging results in the past. This could in turn cause financial institutions to cut back on lending and drive up the cost for borrowers seeking credit.
Regulators have stated that the new rules will help to avoid the costs of bailing out the financial system in the future, which will offset the diminished lending levels.
The framework and timetable for implementing the rules is expected to be laid out at a meeting of the Group of 20 leading nations in South Korea in November. The timetable could cause a lag in the amount of time for the impact of the financial reform to be felt.
Some of the changes will be implemented by 2013, while others will not be put into practice until the start of 2019. The full impact of technical changes to the definition of capital will not fully be felt until 2023.
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