Relief for banks as regulator eases debt rule

City A.M. Reporter
BANKS won a welcome reprieve yesterday after regulators agreed to ease the way a new rule, meant to rein in risky balance sheets from 2018, is compiled to try to avoid crimping financing for the world’s economy.

The decisions, by the Basel Committee’s oversight body, were the latest sign of how regulators have become more willing to accommodate banks as the focus switches to helping economies recover. The relief to lenders may, however, be temporary as the regulators signaled there is still no agreement on the final level of the new leverage ratio, which measures how much capital a bank must hold against its loans and other assets.

The ratio was initially set at three per cent of capital but supervisors from the US, Britain and elsewhere are pushing for a higher proportion, a person familiar with the debate said. The ratio acts as a backstop to a lender's core risk-weighted capital requirements. A ratio of three per cent means a bank must hold capital equivalent to three per cent of its total assets.

“The final calibration, and any further adjustments to the definition, will be completed by 2017,” the group said in a statement.