Industry News

Europe Will Give U.S. Time to Bed In New Administration Before Basel III Deal; Agreement on Basel III rules should be finalized this year says German central banker


Todd Buell | Wednesday, March 15, 2017

The Wall Street Journal Online

FRANKFURT—A finalization of key international rules should take place this year, despite a delay caused by the new U.S. administration needing to fill key negotiating roles and determine positions, a top German central banker said Wednesday.

"If we don't get there this year, it's going to be much more difficult," said Bundesbank board member Andreas Dombret at a conference here. Mr. Dombret said that the U.S. shouldn't be pressured to agree its negotiating position.

"We will give them all the time in the world to find their position," he said. "We are telling our American colleagues, we're at the table, when you're ready we will be there."

"There are not that many open positions," he said. "But it needs two sides at the same table trying to find common ground and that we don't have right now."

The comments come as global banking officials continue to iron out final details on the so-called Basel III rules. Regulators are currently caught in a trans-Atlantic dispute over how banks calculate the riskiness of their assets. To stop banks underestimating the riskiness of their assets Basel wants to implement an "output floor" that would set a strict limit on the amount of flexibility banks have in evaluating risk. European banks want the floor to be as low as possible to give them the maximum flexibility to use their internal calculations.

This represented "basically the only remaining issue" said Basel Committee Chairman Stefan Ingves in remarks at a separate conference in Frankfurt earlier Wednesday.

Regulators had hoped to agree on the deal early this year, but the disagreement on the use of risk modeling has prevented a final deal. U.S. President Donald Trump's skepticism toward financial regulation has also raised questions about America's commitment to international rules.

While European regulators don't want to rush the U.S. position on international financial regulation, bank representatives pushed for more urgency. Wilfred Nagel, Chief Risk Officer, of ING Group said that while it might be a "useful tool" in negotiations to tell Americans to take their time, "it isn't helping the industry."

In remarks earlier Wednesday, Mr. Dombret said, however, that Europe couldn't be expected to implement Basel III, if the U.S. isn't on board.

"The recent debate in the United States on deregulation gives me concerns," said Mr. Dombret Wednesday morning. "Should the U.S. not introduce Basel III, we in Europe will certainly not implement the new rules one-sidedly, and the whole world will then suffer."

Write to Todd Buell at todd.buell@wsj.com

This article was licensed through Dow Jones Direct.

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