UK’s FSA plans delayed Basel II paper for mid-July

The UK’s chief financial regulator plans to issue its discussion paper on implementing the Basel II bank capital adequacy Accord and parallel European Union (EU) rules in mid-July.

The paper will urge banks to get ready for the changes but will seek comments from the banking industry on the regulator’s ideas, officials with the Financial Services Authority (FSA) said. The FSA had hoped to issue the paper by the end of this month. The delay stems from the need to fit the paper into a crowded FSA publications timetable and not from any disagreement about content, officials said.

The complex, risk-based Basel II Accord will determine from late 2006 what proportion of their assets large international banks must set aside as a cushion to guard against losses from banking risks.

The European Commission, the ruling body of the 15-nation EU of which the UK is a member state, wants to apply capital adequacy rules closely modelled on Basel II to all EU banks and investment firms from the same date. The new EU rules will be the product of Cad 3, the Commission’s third capital adequacy directive.