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Basel bank trading rules are delayed

City A.M. Reporter
THE European Union and the United States said they will work on setting a common date in 2011 for tougher new bank trading book rules, signalling the first scheduling slippage in a global drive to make the financial system less risky.

“Both sides agree that within their respective legal systems and in coordination with the Basel Committee on Banking Supervision, they will work towards a common implementation date in 2011 for the Basel trading book rules,” US Treasury secretary Timothy Geithner and EU financial chief Michel Barnier said in a joint statement yesterday.

The Basel Committee of central bankers and regulators had agreed that the new trading book rules would take effect from the end of 2010 but banks have been lobbying for a delay.

Banks say that raising their capital levels too soon would make it harder to keep lending to aid economic recovery. The new rule aims to plug a loophole that allowed banks to shift assets from their bank book to the trading book to avoid heavy capital charges. Basel has estimated that capital charges for market risk would increase by 223 per cent on average under the new rules.