Tower Office, head of the BIS in Basel, Switzerland
Basel, Switzerland (GenevaLunch) – Central bank heads from 27 leading countries meeting in Basel agreed Sunday to follow recommendations made Saturday 5 September by finance officials, who met in London, to impose tougher capital requirements on banks. The new measures are designed to avoid a repeat of the collapse of much of the global banking system at the end of 2008.
The new rules oblige banks to increase the size of their capital buffers, as well as their quality. They also need to implement a leverage ratio that limits the amount of capital a bank can lend according to the reserves it holds.
Efforts are also underway to make banks increase their reserves when times are good, in order to better weather bad times, by limiting the distribution of dividends. These new rules go beyond the Basel II requirements set out by the Bank for International Settlements (BIS), to which central banks had already agreed.
The meeting also tackled the thorny issue of pay, compensation and bonuses to bankers, trying to link bankers’ compensation to the long-term performance of the bank. Some observers were skeptical this could be done, especially in the three weeks remaining before a G-20 summit of heads of government in Pittsburgh, USA, 24-25 September.
Related: Bloomberg, Reuters, The Australian
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News story, GenevaLunch, 7 September 2009.
Filed under: Business
Tags: Bank for International Settlements, bankers, Basel II rules, BIS, bonuses, buffers, capital requirements, central bank heads, compensation, dividends, finance ministers, G-20 meeting, London, Pittsburgh US, reserves, UK
November 11th, 2010 at 9:20 am
[...] New capital requirements have been drawn up by the Basel Committee of central bankers, known as Basel III, but the committee delayed the implementation deadline under pressure from countries. US Treasury [...]