Navigating New Waters: Global Bank Regulation Faces Challenges Amid Basel Talks

The ongoing discussions at the Basel Committee on Banking Supervision are highlighting significant challenges in global bank regulation. As nations grapple with compliance costs and regulatory frameworks, the future of banking standards hangs in the balance, particularly with the U.S. targeting a 2025 adoption of Basel III.

Key Takeaways

• U.S. regulators aim for Basel III implementation by January 2025.
• The European Commission is considering delaying 122 legislative acts to reduce compliance costs.
• U.S. Treasury Secretary emphasizes the need for domestic control over financial regulations.
• The Basel Committee's discussions reflect a shift towards more insular regulatory practices.

U.S. Targets 2025 For Basel III Adoption

A senior official from the Federal Reserve has confirmed that the U.S. is on track to implement the Basel III regulatory framework by January 2025. This aligns with the European Union's timeline, indicating a synchronized approach to global banking standards. The Federal Reserve is expected to release an initial draft of the regulations by early next year, setting the stage for compliance among U.S. banks.

European Commission's Compliance Cost Concerns

In a bid to alleviate the financial burden on the EU's financial sector, the European Commission is contemplating the postponement of up to 122 delegated acts. These acts, part of the Capital Requirements Regulation (CRR), are deemed non-essential for the immediate functioning of primary legislation. This move aims to streamline compliance processes and reduce costs for financial institutions across Europe.

The Shift Towards Insular Regulation

U.S. Treasury Secretary Scott Bessent has voiced concerns over the outsourcing of financial regulation to international bodies, advocating for a more insular approach. This perspective aligns with the broader ‘America First’ philosophy, suggesting that the U.S. may prioritize its own regulatory standards over global consensus. Former regulators have urged continued U.S. participation in Basel discussions, emphasizing that such involvement has historically served American interests well.

Upcoming Decisions on FRTB

The European Commission is expected to make a decisive announcement regarding the Fundamental Review of the Trading Book (FRTB) within days. Stakeholders have expressed support for a delay in the implementation of these capital rules, indicating a desire for targeted changes rather than a complete overhaul. This decision could significantly impact how trading book capital requirements are structured in the EU.

Conclusion

As the Basel Committee continues its discussions, the landscape of global bank regulation is poised for transformation. With the U.S. aiming for a 2025 implementation of Basel III and the EU considering compliance cost reductions, the future of banking standards will likely reflect a balance between national interests and global cooperation. The coming months will be critical in shaping the regulatory framework that governs international banking practices.

Sources

• US has got what it wanted from Basel, say former regulators, Risk.net.
• EC moots postponing 122 delegated acts to cut compliance costs, Risk.net.
• Fed official confirms US targeting 2025 for Basel III adoption, Risk.net.
• EC to decide on FRTB delay within ‘days’, Risk.net.
• Mr Bessent goes to Basel: the fate of global bank regulation, Risk.net.