Standard Chartered executives, and a number of other banks within working industry lobby groups, have highlighted seven parts of regulation that need alteration so that legislation will provide stability and liquidity, without creating damaging consequences.
In an exclusive interview with Euromoney | Sibos Insider, Karen Fawcett, group head, transaction banking, and George Nast, global head of product management, explained that the bank has been working with a number of other institutions to collate data showing that certain regulations may have unnecessarily harsh side effects on trade.
Many banks have reacted negatively to incoming regulations, particularly those relating to liquidity and capital levels.
“It’s very clear that the regulations are going to get tougher, but there’s also been sensible dialogue with the regulators as to how they should be adapted to fit the reality of products/services,” explains Fawcett, “We need to adapt seven areas across the regulations so we can see the true cost of doing business which reflects the actual risks involved.”
Nast stressed the unfortunate side effects that Basel III has on global trade and the importance of presenting the regulators with a set of facts and figures that highlights that a negative effect on trade is both unwarranted and undesirable.
“The ICC has put together a trade registry which shows that trade is very low risk. This has been useful in making a convincing argument that elements of the new Basel rules don’t make a lot of sense,” notes Nast.
Research suggests that corporate accounts may be more stable than regulators have previously assumed, meaning that the liquidity provisions in Basel III may be stricter than is actually necessary to ensure a stable market.
Basel III is a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on banking Supervision which enforces banks to have a certain level of capital on their books in order to promote bank stability and liquidity.
“We’ve been working with a clearing house studying liquidity and the behaviour of operational accounts. Their study has shown that corporate operating accounts are extremely stable. Regulators are currently assuming 25% would runoff in a crisis, whereas the actual figure is much lower,” explains Fawcett.
Standard Chartered believes that if it and its peers can present regulators with a rational argument then they may be forced to concede that there are flaws with elements of Basel III.
“We’ve been working with other banks to supply this data. We’ve been doing this with BAFT, and with an informal group consisting of the ten largest banks,” says Fawcett. “If you go in alone the regulators assume you are arguing your own corner. It’s important to go to the regulators as a group,” adds Nast.
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