The announcement by the Group of Governors and Heads of Supervision in Basel, which will be presented at the G20 Leaders summit in November, largely addresses the concerns expressed by the industry in particular regarding the calibration of and transition to the new rules. The effort requested of the industry will be substantial however the long transition period should contain its impact on the economy.
It is in the interest of sound, financial institutions that excessive risk-taking, poor corporate governance and insufficient levels of loss-absorbing capital are not allowed to endanger the economy nor put the reputation of the entire system at risk. In this respect, the Basel Committee's international reform of prudential regulation is an important tool. Updating supervisory authorities' powers to the reality of cross-border banking is important as well. The European Union is taking relevant steps in this direction.
Some issues in the reform of prudential regulation, such as eligibility criteria for non-common equity, the treatment of counterparty risk, liquidity requirements and possible capital surcharges for systemically relevant banks, still require further clarification. The industry will continue to be engaged in an on-going and transparent dialogue with the authorities.
Milan, September 13, 2010
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