Basel’s capital commitment, cross-border EU banking, euro swaps fix

The week on, September 22–28, 2017

CAPITAL RULES may be too risk-sensitive, Basel fears

US AND JAPAN push for twin EU bank holdcos

EURO SWAPS MARKET plays catch-up in rates reform


COMMENTARY: Sticking with simplicity

Reforms such as the standardised measurement approach for operational risk capital have attracted criticism from the industry, but the Basel Committee on Banking Supervision is sticking to its guns. At the Asia Risk Congress in Singapore this week, deputy head Toshio Tsuiki worried publicly that capital rules might still be too risk-sensitive, and doubled down on the committee’s policy of looking for simple and standardised rules over more risk-sensitive approaches. He suggested the slow rollout of recent reforms showed there was still further to go in this direction. With a comprehensive regulatory review now underway at the Financial Stability Board (FSB), Tsuiki is also having to hold the line against the tendency of major jurisdictions to go their own way on financial regulation.

The Basel Committee has become so central to financial regulatory reform discussions that it is easy to forget it isn’t the only game in town. Capital adequacy rules have been in the spotlight for years, but – especially when it comes to preventing the kind of major collapse that would be involved in the spread of another financial crisis – it is not clear any realistic capital holding would be big enough to make a difference (Basel III levels almost certainly wouldn’t be). Regulators such as the CBRC’s Andrew Sheng doubt any reformed capital adequacy rules would do any better.

By focusing on simplicity, the Basel Committee may in fact be doing everyone a service, by making it obvious that capital levels alone have limited power and will not be enough to promote good behaviour among banks. That has to be up to individual national regulators, and international regulatory bodies such as the FSB, which have more tools at their command.



Clearing houses across Asia have seen a surge in volumes following the introduction of margining rules; LCH has seen a 37% growth in its SwapClear business, and Singapore Exchange has had record volumes, clearing $2.6 billion daily in US dollar CNH swaps. Asia clearing surge raises concerns of eligible collateral



“We’ve analysed social media data, but we haven’t found anything particularly useful” – Mark Webster, Acadian



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