Regulators target inconsistencies in bank capital ratios

In a reminder of its activist work program, the Financial Stability Board has amplified its view of the priorities for the Brisbane Group of 20 summit of political leaders in November.

Mark Carney, who is head of the Bank of England as well as of the FSB, wrote in a letter yesterday that one priority of the Brisbane Summit would be for the Basel Committee on Banking Supervision to "set out its plans to address excessive variability in risk-weighted asset calculations [which will] improve consistency and comparability in bank capital ratios."

The Basel Committee would also finalise the proposed net stable funding ratio, Carney said.

Taking a wide view that defended the tenor of the G20's reform agenda for financial regulation, Carney wrote that "reforms have brought significant new capital into the core of the financial system and made firms, investors and regulators more alert to the risks that arise from excessive leverage, poor valuations, maturity mismatches and illusory liquidity.

"Our task ahead is to make sure we complete the job and then manage the system dynamically and effectively. That will require more transparency, greater consistency and demonstrated willingness to adjust in the face of new information."