From Basel III to Basel IV. So the rule changes were renamed previously established in order to “reduce uncertainties” of the global banking sector. Central bank Governors and the Supervisory Authority have finally reached an agreement, after more than a year of negotiations and controversies on how to calculate the risks associated with the assets held by banks.
THE WORDS OF MARIO DRAGHI
“A milestone which will make the capitalization system more solid and will improve confidence in the banking system", declared yesterday, December 7, the number one of the ECB, Mario Draghi, as president of Ghos (Group of Governors and Heads of Supervision) the body that leads the Basel committee born in 2008 in order to strengthen the solidity of the banks and above all to avoid a new financial crisis like the one experienced in recent years.
“They are reforms that will help reduce excessive diversity among risk assessments and which will improve comparability and transparency on banks' capital levels”, confirmed Stefan Ingves, president of the Basel Committee, during the conference held with Draghi.
THE NEW BASEL RULES
The cornerstone of the new agreement is the postponement of the entry into force of the new legislation from 1 January 2019 to 1 January 2022 with full application in 2027, an "extension" aimed at giving more time to both credit institutions and the Supervisory Authority to adapt to the new rules without having to endure glaring setbacks. The debut of the provisions on minimum capital requirements for market risks has also been postponed to 2022.
Another important aspect is in fact the introduction of an output floor, i.e. a basic threshold for requests for capital on assets, equal to 72,5 per cent, with a transitional regime starting from 2022 and up to 2027. The minimum level is initially envisaged at 50% (in 2022) for reach 72,5% in 2027.
Draghi guaranteed that “there will not be a major impact on capital,” but those who do not respect the rules will still need new capital to cover the risks.
NO DEAL ON GOVERNMENT BONDS
But the good news for banks, especially for Italian ones, does not end there. Ghos has not reached an agreement on government bonds in the belly of the institutes, the standard proposed by Germany which represented a real bogeyman for many local credit institutions.
"Many, if not most of the members did not want measures on sovereign debt exposure" - said Draghi answering a question from a journalist - "I cannot comment on what will happen in the future, but at present it is not it was possible to reach a unanimous consensus,” added Ingves.
The new rules were hailed as a breakthrough by the Bank of Italy according to which they represent the "completion of the responses to the weaknesses of the regulatory framework that emerged during the global financial crisis".
THE BANKS IN PIAZZA AFFARI
Softer rules than expected therefore but also more time to apply. Two very positive news for the banks, especially for the Italian ones, which on Piazza Affari celebrate with increases that exceed 3%, also driven by the news from the United Kingdom on Brexit.
