G20 to consider tougher capital rules for banks

FINANCE ministers in the G20 are considering a tough capital regime for the world’s biggest banks that will go beyond Basel III rules, CNBC said last night.

The US, however, disagrees with the proposals to add two to three per cent to the Basel capital rules, the report claimed.

A senior official told the broadcaster that the proposal would call for big banks to increase their capital to somewhere between nine and 10 per cent. The G20 finance ministers will meet to discuss the latest Basel rules on the 19 October in South Korea.

In the UK, Lord Turner of the Financial Services Authority has already expressed a wish to see more stringent capital ratios imposed on banks to prevent funds drying up.

In a speech last week Turner said that “if philosopher kings were designing a banking system entirely anew for a greenfield economy, they would choose still higher ratios”, though he accepted that the Basel III agreement was a good starting point.

The international banking rules will impose a 7.5 per cent ratio on banks’ Tier 1 capital holdings by 2018. Many in the banking industry had feared the levels would be much higher.