US Regulators Express Confidence in Basel Outcomes, Former Officials Advocate Continued Engagement

Former U.S. regulators have voiced their satisfaction with the outcomes of the Basel Committee on Banking Supervision, emphasizing the importance of continued U.S. participation in the international regulatory framework. This comes amid rising skepticism from some quarters of the current administration regarding the efficacy of Basel rulemaking.

Key Takeaways

• Former regulators assert that U.S. interests have been well-represented in Basel outcomes.
• Calls for ongoing U.S. involvement in the Basel Committee to ensure favorable regulatory conditions.
• Concerns raised about the potential impact of withdrawing from international regulatory discussions.

Background on Basel Committee

The Basel Committee on Banking Supervision was established to enhance financial stability by improving the quality of banking regulation worldwide. It aims to create a level playing field for banks across different jurisdictions, ensuring that they maintain adequate capital and risk management practices.

U.S. Interests in Basel Outcomes

Randal Quarles, a former vice-chair of supervision at the Federal Reserve, highlighted that the Basel framework has historically aligned with U.S. interests. He noted that the U.S. has been a driving force in shaping the rules that govern international banking practices.

• Key Contributions of the U.S. to Basel:
  1. Capital Requirements: The U.S. has influenced the establishment of stringent capital requirements for banks, ensuring they can withstand financial shocks.
  2. Risk Management Standards: U.S. regulators have pushed for robust risk management practices that protect the financial system.
  3. Transparency and Accountability: The U.S. has advocated for greater transparency in banking operations, which is crucial for maintaining public trust.

Current Administration's Skepticism

Despite the positive feedback from former regulators, some officials within the current administration have expressed doubts about the Basel process. They argue that it may lead to an “outsourcing” of regulatory authority, potentially undermining U.S. sovereignty in financial regulation. This skepticism raises concerns about the future of U.S. participation in the Basel Committee.

The Importance of Continued Engagement

Former regulators are urging the current administration to remain engaged with the Basel Committee. They argue that withdrawing from these discussions could jeopardize the favorable regulatory environment that the U.S. has worked hard to establish.

• Potential Risks of Withdrawal:
  1. Loss of Influence: Without active participation, the U.S. may lose its ability to shape international banking standards.
  2. Increased Regulatory Burden: A lack of alignment with international standards could lead to increased compliance costs for U.S. banks.
  3. Competitive Disadvantage: U.S. banks could find themselves at a disadvantage compared to foreign banks that are still aligned with Basel standards.

Conclusion

As discussions around the Basel framework continue, the voices of former regulators serve as a reminder of the importance of U.S. involvement in international banking regulation. Their insights underscore the need for a balanced approach that considers both national interests and the benefits of global cooperation in financial oversight.

Sources

• US has got what it wanted from Basel, say former regulators, Risk.net.