Big US banks seen gaining from Basel accord

  • Business
  • Thursday, 13 May 2004

WASHINGTON: Large banks that have elaborate risk-measurement systems stand to be the biggest winners in the United States from an international bank safety accord reached on Tuesday, bank industry analysts said. 

“It can serve as an advantage from a capital point of view for your larger, mostly money centre and super-regional banks that have more sophisticated risk management and modelling systems, and put at a capital disadvantage your more mid-cap and smaller banks that will rely on something closer to the current system,” said Kevin Fitzsimmons, a bank analyst with Sandler O'Neill. 

A committee of international bank regulators in Basel, Switzerland, approved a sweeping overhaul of bank capital rules aimed at strengthening the world's financial system after compromises seen benefiting the United States. Regulators are due to iron out some details and publish the draft deal by the end of June. 

The accord brings to a close five years of negotiation over how to update 1988 bank safety rules to fit modern financial markets. Known as Basel II, the agreement more closely measures banks' exposures to risks and is intended to prevent financial problems in one corner of the globe from spreading. 

Large US banks will gain from regulators' decision to delay by a year – until January 2008 – implementation of the most complicated requirements, a trade association official said. 

“It's good news because it gives financial institutions additional time to adjust their operational and risk management systems to come into compliance,” said Richard Whiting, general counsel for the Financial Services Roundtable. – Reuters Latest business news from AP-Wire 

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