Banks Gain in Rules Debate

WSJ

The world's banks appear to be winning a reprieve from tough new capital requirements and curbs on risk-taking, as regulators and central bankers are moving toward less stringent rules than initially proposed.

Bowing in part to fears that tougher requirements would diminish the credit needed to revive a sluggish global economy, officials gathered in Basel, Switzerland, are trying to strike a compromise over a set of new international banking standards initially proposed in December. The final accord will have a more global reach, and thus in some respects a more potent impact, on banks and borrowers than the financial regulatory bill likely to pass the U.S. Congress Thursday.

The new Basel rules, as they are called, would still be stiffer than existing standards. Industry officials fear the changes could shrink bank profit margins and make credit tighter and more costly for consumers and businesses. Alterations under discussion this week would ease key requirements that have been under discussion for months. Advocates for a tougher line have argued that excessive concessions could leave the financial system vulnerable to problems the entire process is intended to address.

"I think there's a growing feeling among finance ministers that... growth is anemic. Do you really want to threaten a fragile recovery?" Stephen Green, chairman of Britain's HSBC Holdings PLC, said in an interview. "I think this will end up in a sensible way."

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