Banks are facing pressure from global regulators to be more transparent about their capital reserves in an effort to ward off future financial crises and bolster confidence in lenders’ resilience.
The Basel Committee on Banking Supervision, which brings together supervisors from 27 nations including the U.S., U.K. and China, said the measures would force banks “all the components” of their capital and make it clear where they are located on balance sheets. The rules will apply starting June 30, 2013.
“Clear and comparable disclosure is the key to improving both market confidence and financial stability,” Stefan Ingves, the Basel committee’s chairman, said in a statement on the group’s website.
Global regulators are seeking to force banks to hold more capital and to make it harder for them to hide excessive risk in an attempt to prevent a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc.
Efforts by regulators and investors to predict how banks might withstand the crisis were hampered by “insufficiently detailed disclosure” and a “lack of consistency in reporting across banks and jurisdictions,” the group said. “This lack of clarity may have contributed to uncertainty.”
The Basel group agreed in 2010 on a package of rules, known as Basel III, that more than triples the core reserves that lenders must hold to absorb losses.
The disclosure rules published today “will let banks demonstrate improvements to the quality of their capital bases as they proceed towards Basel III implementation,” Ingves said.
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