Regulators says Basel III bank capital work is done

LONDON (Reuters) – Global banking regulators on Monday drew a line under a decade-long project to toughen up capital requirements and urged lenders to use the flexibility in rules to support pandemic hit customers.

The Governors and Heads of Supervision (GHOS), a body that oversees the Basel Committee of banking regulators that writes capital standards for lenders, stopped short of new relief measures to battle the pandemic, saying steps taken so far have buttressed the sector’s resilience.

Instead, regulators sought to reassure banks that they would have plenty of time to replenish buffers tapped to maintain lending.

“After the crisis, supervisors will provide banks with sufficient time to rebuild their buffers, taking account of economic, market and bank-specific conditions,” GHOS said in a statement.

Banks have been wary about running down their buffers, which in some cases triggers actions like a halt in payouts, prompting regulators to call for a reform of how the buffers work.

GHOS agreed earlier this year to delay some of the remaining elements of Basel III, a comprehensive package of tougher capital requirements agreed by world leaders after taxpayers bailed out banks during the financial crisis a decade ago.

GHOS said it also agreed to mark a “clear end” to the Basel III agenda and focus on monitoring its implementation, assessing their effectiveness and taking into account lessons from the pandemic.

Basel III has in practice tripled or more the amount of capital banks now hold, with policymaker appetite for a new round of reforms having long waned.

The Basel Committee’s future work will focus on new and emerging topics like structural trends in the banking sector, digitalisation of finance, and climate-related risks.

“Any further potential adjustments to Basel III will be limited in nature and consistent with the Committee’s evaluation work,” GHOS said.