Basel regulators still hoping for 2005 date

The Basel II bank capital adequacy Accord could still come into effect by 2005, although the date does hang in the balance, international regulatory sources said.

They were commenting on remarks by senior national regulators that the date was likely to slip to 2006 because of the complexity of the new risk-based Accord designed to replace the simpler current capital Accord – Basel I – that dates from 1988. They were also speaking ahead of key meetings of global banking supervisors next week in Basel.

German Bundesbank president, Ernst Welteke, said in a mid-February newspaper interview that the new rules, which will determine how much reserve capital major banks must set aside to guard against banking risks, probably won’t take effect until 2006.

The Basel Committee declined to comment on Welteke’s remarks. But other regulators say much depends on whether a key survey seeking information on how Basel II could affect banks can be sent out to banks on June 1.

If that date is achieved, then it is a reasonable bet that the third and final consultative paper on Basel II – CP3 – can be issued by the end of this year for comment by the banking industry. That will enable the Basel Committee on Banking Supervision, the architect of Basel II and the body that in effect regulates international banking, to issue its final version of the Accord in the first half of next year.

That should still allow time for national legislation to be passed where necessary, and for banks to get their systems up to scratch by 2005, regulators said.

But they agreed that if the timetable slips further, then 2006 becomes the likeliest date.

The Capital Task Force, the highest level sub-grouping of the Basel Committee, meets on March 11, and the Committee itself meets the next day in an effort to resolve problems.

Supervisors are concentrating on agreeing a policy for treating asset securitisation and loans to small- to medium-sized companies within the credit risk provisions of the Accord – the issues that have held up progress in recent months.

Delays have been a feature of the Basel II story. The Basel Committee last year postponed the Accord’s coming into effect by a year to 2005 while hoping to issue CP3 early this year. In December it was decided new research in the form of QIS3 was needed, and that CP3 would be issued around mid-year. The complexity of the task then resulted in further delays.