RiskTech Forum

Basel III reduces systemic risk, says founding committee’s chairman

Posted: 19 October 2012  |  Source: FINCAD

The Basel III capital requirements will reduce the systemic risk that exists in the global financial system, Basel Committee on Banking Supervision chairman Stefan Ingves said in a recent Wall Street Journal opinion piece.

The official emphasized the contributions that the low capital requirements made to the global financial crisis, and reiterated the cost to the worldwide economy over the last five years, according to the news source.

These loose capital rules allowed the lending institutions to use too much leverage, which triggered the need for bailouts from various financial institutions and nations. He said that although various market participants have criticized the minimum standards, they will help to make banks more resilient and provide a more simplistic set of rules, the media outlet reports.

Ingves stated that Basel III made the capital requirements more straightforward by focusing on tangible common equity, and also requiring that all parts of the capital base and its associated deductions be revealed in a certain manner, according to the news source.

While certain market participants have criticized the costs of Basel III, some nations have stated that they will aggressively implement the requirements, with Sweden indicating it will adopt the rules six years ahead of schedule, according to The Financial Times.