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Debate over Basel Capital Requirements

Banks invoke troubled global economy in pressing Basel Committee to back off the credit-risk capital restriction it proposed in March.

By Silla Brush, Bloomberg | Updated on June 07, 2016

Banks are stepping up opposition to looming capital standards, with one of the financial industry’s largest lobbying groups warning that regulators risk slowing the global economy with a clampdown on lenders’ ability to judge the health of their own borrowers.

The Basel Committee on Banking Supervision’s proposed curbs on banks’ use of internal models to assess risks would have a “material impact” on lending to financial institutions, corporations, and other borrowers, the Institute of International Finance (IIF) wrote in an 83-page letter to the regulator. The IIF called on the Basel Committee, whose members include the U.S. Federal Reserve and the European Central Bank, to grant banks more leeway in assessing the riskiness of borrowers, particularly large corporations.

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