Bank capital rules subject to another review

The Financial Stability Board says it is undertaking "a strategic review… [into whether] the current capital framework achieves the right balance between simplicity, risk sensitivity, and comparability across banks."

In a report to the Group of 20 global political leaders, released on Friday, the FSB said the Basel III framework was still expected "to substantially raise the quantity and quality of their capital and liquidity", and that "almost all FSB and G20 jurisdictions have now adopted rules to implement" the new standards, "according to a timeline that avoids economic disruption."

The FSB said that many global banks were "now on course to meet the new minimum requirements well ahead of the 2019 deadline for full implementation."

"The shortfall in equity capital today, from the 2019 minimum, is only half a year's profits for the largest banks.

"Where banks have successfully built capital, access to credit has returned, supporting economic recovery."

But, the FSB said, "there are still major challenges. The strengthening in capital has been uneven, and some banks still need significant repair of their balance sheets."

"Moreover, analysis of the risk models that banks use to calculate their capital needs shows large differences that cannot be explained by underlying risks, and that are driven instead by supervisory decisions and differences in bank risk models.

The FSB said this "highlights the importance of improving the comparability across banks of the risk weights used, and having a simple leverage ratio requirement as a backstop to risk-based measures."

It said the new capital measures and the review were "need[ed] to address these remaining issues if we are to rebuild fully confidence in the strength of bank balance sheets."