WASHINGTON, D.C., January 8, 2013 – Over the weekend, a committee of international regulators and central bankers decided to slightly revise and delay the Basel III bank capital accord, a package of financial rules aimed at preventing further financial crises. The committee’s announcement was met by relief from U.S. community banks and lawmakers of both parties, many of whom had expressed concerns about the onerous global liquidity standards put forward in the draft version of the Basel package two years ago.
John Berlau, CEI’s senior fellow for finance and access to capital, hails the breathing room this pause gives to Main Street banks. But Berlau warns the flawed accord needs a thorough restructuring.
“If Basel had been implemented this year as written, it almost certainly would have thrown the U.S. and other economies into a recession more than going over the fiscal cliff ever would have,” Berlau says.
“Although the ‘Basel cliff,’ as I have called it, may be averted for now, dangers still lurk in its implementation in the years to come. This is both because of the accord’s wrongheaded bias in favor of sovereign debt — it actually favors Euro debt over conventional mortgages and small business loans to American borrowers — and because U.S. regulators have rushed headlong to push it through before Congressional action that is almost certainly needed to ratify any complex international agreement of this size.”
>> Read Berlau’s OpenMarket post about the Basel III accord. Also, read Andrew Ross Sorkin’s Jan. 7 New York Times article quoting Berlau. (The article originally misidentified Berlau as being affiliated with another think tank, but has since been corrected.)