Basel chief assesses cost of capital rules- FT

LONDON, May 4 (BestGrowthStock) – Plans to require banks around the
world to hold more capital to protect against future financial
crises could knock up to one percentage point off world
economic growth, the Financial Times reported in its Tuesday
edition.

Nout Wellink, chairman of the Basel Committee on Banking
Regulation, told the FT the proposals could cut global growth
by a cumulative 0.5 to 1 percentage point over a period of
several years, according to calculations by economists at the
Dutch central bank.

“If that would be the price to get a really resilient
banking system, that price is not too high,” Wellink told the
paper.

“The mere fact that you have a more stable, less
pro-cyclical system has a positive impact on growth,” he said.

Banks warn that Basel III will create so much demand for
capital it would curb credit and undermine economic
recovery.[ID:nSGE63I0LV]

The proposed changes take effect by the end of 2012 and
include higher and better quality capital, minimum liquidity
requirements and a cap on leverage. [ID:nLDE63I23Z]

Wellink also said plans to introduce a global banking tax
were “premature.”

“I doubt whether this is a good idea. It is born out of
frustration. There are strong political motives behind it,”
Wellink told the FT.

Last month, the European Union threw its weight behind a
levy on banks in a draft letter to G20 countries, as pressure
builds globally to tax an industry many see as responsible for
the financial crash. [ID:nLDE63C28V]

Wellink said it was important to asses the impact of the
Basel Committee’s proposals to increase capital requirements
before a decision was taken on a global bank levy.

“We should first finalise the Basel package and then see
whether it’s still useful to have an additional levy or tax, or
whatever you want to call it,” he said.

Investment

(Reporting by Caroline Copley; Editing by Kazunori Takada)

Basel chief assesses cost of capital rules- FT