Central bank governors and financial regulators from 27 countries agreed on new, stricter banking rules at a meeting in Basel, which are intended to make banks around the world more resilient to crises.
The new agreement, in addition to increasing core capital, also includes other protective measures to ensure that the capital-to-total-assets ratio of banks does not fall below 7 percent. The Basel agreement was reached nearly two years after the collapse of the American investment bank Lehman Brothers, which plunged the world into the deepest recession since World War II. The aim of the new measures is to strengthen banks to prevent a similar crisis from recurring. The agreement is the result of a compromise between American banks and banks from Europe, which are generally less capitalized, so they will have to raise more capital under the new Basel rules. For example, one study showed that the ten largest German banks would need to raise $105 billion in capital.
The BCBS guidelines are not binding, but previous agreements among regulators in Basel have been widely applied and followed by leading global financial institutions. Analysts have assessed that the new rules will require banks to set aside large sums of potentially new capital, keep more money in reserves for protection against bad times, and limit lending if it appears that the economy is growing too quickly. However, bankers simultaneously fear that the new system could slow economic recovery, prevent hundreds of billions of dollars from potential lending, and, according to some estimates, reduce economic growth by several percentage points. Experts estimate that the new rules will increase the cost of loans and make them harder to obtain. (www.hrt.hr)
