Bailout

Delaying Basel III

By Felix Salmon

David Enrich and Damian Paletta have the latest news on the Basel III front, and the compromise seems to be coming into focus: not so much on the substance, which remains more or less intact, but rather on the timing, which could get pushed out as much as a decade.

Kevin Drum is OK with that:

I don’t have any problem with this. And it sounds like no one else does either. If the new requirements are stiff enough to actually make a difference, we’d be nuts to demand that banks adopt them immediately in an environment where growth is already slow, lending is anemic, and raising risk capital is difficult. The real question isn’t so much the timeframe for adopting the new rules, it’s whether the rules are any good.

This makes some sense, but as anybody who’s ever faced a deadline knows, if you commit to doing something by some far-off date, you’ll end up doing absolutely nothing until suddenly it rushes up on you.

What’s more, it’s worth remembering that Basel II was meant to be fully implemented by 2004, and still hasn’t really been adopted in the U.S., six years after that deadline. So I fear that the pushed-back deadlines for Basel III will in effect be the date at which banks start worrying about the new rules, rather than any kind of firm line in the sand.

Still, if we’re going to compromise on anything, then compromising on timing makes sense. Let’s just hope that it comes with a commitment by national regulators to hold their banks to the timetable, and to make sure they’re on course to meet that pushed-back deadline once it’s set.

Full post as published by Macroprudential on June 04, 2010 (boomark / email).