IMF warns banking rules lack global theme

TOUGH new banking rules may not be enough to prevent another financial crisis unless there is closer global co-ordination, the IMF warned yesterday.

Global banking supervisors agreed in September the so-called Basel III rules which set tough new requirements for bank capital and liquidity. The Financial Stability Board (FSB) is now working on additional measures for large banks whose failure would pose a serious risk to the wider financial system.

But an IMF study of 62 “large complex financial institutions” warns that some investment banks are still likely to find a way to circumvent the myriad of new rules facing them.

“Banks with major investment banking focus may be able to restructure their activities to reduce the effects of regulatory reforms, notwithstanding a multitude of regulations affecting their activities,” the IMF report said. The IMF warns that some banks may be able to shift their activities into the less regulated “shadow banking” sector while others could relocate to countries with less onerous regimes: “In some countries, the slow progress in reaching international consensus have resulted in the adoption of national regulatory reform.”