Basel Committee rejects calls to simplify latest regulations

 
Tim Wallace
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A SIMPLE measure of bank safety would be easily dodged by institutions, top regulator Wayne Byres said yesterday, defending the complex Basel III regulations.

The Basel Committee’s general secretary insisted the rules covering capital and liquidity ratios represent the best chance of restoring stability to the sector.

“A simple capital-to-assets ratio will, on its own, create incentives for banks to undertake riskier activities and reduce their less risky activities,” Byres said.

“We also have seen in the past that simple measures can be easily arbitraged.”

And the regulator also insisted the Committee had cut down complexity where possible, pointing to efforts to simplify the instruments included in capital requirements, as well as the use of a leverage ratio as a relatively simple backstop measure of risk.