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Frankfurt am Main | 30.01.2018

Dombret calls for swift implementation of Basel III

Bundesbank Executive Board member Andreas Dombret has defended the Basel III package of reforms in a panel discussion held at the Institute for Law and Finance of the University of Frankfurt. "Yes, we are done with Basel, but we should lose no time and start implementing it," said the Bundesbank Executive Board member responsible for banking supervision. 

Minimum standards for internationally active banks 

The Basel Committee agreed on the finalisation of the Basel III capital standards at the end of 2017. These are minimum capital standards for internationally active banks. Stefan Ingves, Chairman of the Basel Committee and Governor of the Swedish central bank, reminded the audience that the Basel III framework is a central element of the Basel Committee's response to the global financial crisis. Whether these reforms will be enough or whether more needs to be done will now depend on how they are implemented, he noted, explaining in the words of Johann Wolfgang von Goethe, after whom the university is named, that "willing is not enough, we must do". 

Mr Dombret made it clear that there is no alternative to the global standards. However, he repeatedly called for a regulatory break given that a certain sense of regulatory fatigue prevails. "But do not get me wrong", he said, "this is no ticket for regulatory capture and deregulation." Mr Dombret highlighted the need to address other pressing issues, such as cyber risks. 

William Coen, Secretary General of the Basel Committee, noted that there had also been talk of reform fatigue and a regulatory break in 2006, after which things famously took a turn for the worse. 

No compromise in the risk weighting of government bonds 

Mr Ingves said he regrets the fact that no compromise was reached over the risk weighting of government bonds on banks’ balance sheets, commenting that, internationally speaking, "we are very far from reaching a consensus". However, Mr Ingves remarked that he considers the end result of Basel III to be "good enough". 

Michael Gibson, Director of the Division of Banking Supervision and Regulation of the US Federal Reserve, told the audience that, in the United States, addressing the risk weighting of government bonds is not very high on the agenda, but said he understood why this might be different in the euro area. He expressed relief that the US would now have a period of five years in which to implement Basel III. Mr Coen stressed that, nonetheless, this would be the maximum length of time allowed and that he assumed that some countries would implement the rules more quickly. 

First implementation, then review of the framework 

In the following Q&A session, Christian Ossig, Co-Chief Executive of the Association of German Banks (Bundesverband deutscher Banken), called for a review of Basel III. He suggested that parts of the framework that he sees as inconsistent or wide of the mark should be ironed out through a review process. 

Mr Dombret and Mr Ingves replied that banks would first have to implement Basel III and that revisions to the regime could only be discussed once it had been tried and tested. "The implementation will be a challenge for the industry," Mr Coen admitted. 

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