Bailout

More reassuring news on Basel III

By Felix Salmon

Robert Peston provides the latest piece of the Basel III puzzle, adding to last night’s report from Australia: while the Tier 1 capital ratio looks set to be 8%, the core Tier 1 capital ratio — the bit which is hardest to game, and which is basically just pure equity — seems to be 7%. That number seems to be made up of a base minimum of 4%, plus a 3% conservation buffer.

Peston also helps out on the way the battle lines are being drawn: while Germany, France, Italy and Japan are pushing for lower ratios, it’s the U.S., UK and Switzerland which want higher ratios: Peston says they were pushing for something between 8% and 9%.

The U.S., UK, and Switzerland, of course, between them account for the overwhelming majority of the world’s global banks. So if their regulators get tough on capital rules, making it clear to the likes of JP Morgan, Barclays, and UBS that they would really like to see core equity closer to 9% than 7%, then we might even end up in a rule where the de facto global standards are tougher than the de jure Basel regulations. Which would be no bad thing at all.

Full post as published by Macroprudential on September 09, 2010 (boomark / email).