Central banks back tougher banking regulation

by Richard Kilner

Story link: Central banks back tougher banking regulation

Banks will have to have greater capital under new regulations backed by the Bank for International Settlements (BIS), which consists of the world’s central banks.

A more in-depth set of measures will be unveiled by the end of 2009, and are intended to be implemented in such a way as to not damage the global economic recovery.

Amongst the measures are a global minimum standard for funding liquidity and a framework for countercyclical capital buffers, above and beyond the usual minimum requirements.

Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank, has stated the new regulations would see enhanced liquidity and capital, reduced leverage and should deliver a more resilient banking sector.

The financial crisis and ensuing recession has seen banking regulation come under a strong spotlight, and earlier this month Prime Minister Gordon Brown gave an interview to The Financial Times in which he supported the notion of bankers’ bonuses being clawed back should the firm fail to perform well.

The Prime Minister has also indicated he believes that bonuses should be given on the basis of longterm success.