Gulf regulators need guidance on Basel III

Gulf regulators need guidance on Basel III

Suwaidi said he was concerned by a proposal requiring banks to hold additional common equity tier-one capital to meet higher loss absorbency requirements under Basel III.

November 28, 2012 9:16 by Reuters

Gulf regulators are seeking advice from a committee that wrote stricter rules on bank capital being introduced on Jan. 1 to ensure Basel III is applied consistently in the region.

UAE central bank governor Sultan Bin Nasser al Suwaidi said “general guidelines on the subject from the BCBS (Basel Committee on Banking Supervision) would be helpful and they will make the exercise more consistent region-wide.”

“Central banks in our region could develop a peer-group approach for this exercise so they could learn from each other,” he told a conference on banking supervision on Tuesday.

While the BCBS had hoped Basel III rules would be adopted globally on Jan. 1, U.S. authorities said earlier this month they would delay implementation and European Union sources told Reuters this week the bloc was set to follow suit.

That led Asian financial leaders to say on Tuesday the EU should limit any delay in Basel III to months not years, amid fears the U.S. decision to shelve the new global regime could derail it completely.

Also on Tuesday, Wayne Byres, secretary-general of the BCBS said the introduction of Basel III will go ahead as planned. “A large number of jurisdictions have everything in place and are ready to go on Jan. 1 2013,” he said.

Basel III requires the six Gulf Cooperation Council (GCC) states, who have complied with Basel II, to identify so-called domestic systemic important banks (D-SIBs) using their own methods and based on criteria specified by the BCBS.

Regional and international banking regulators were present at the conference, organised by the Arab Monetary Fund (AMF).

Suwaidi said he was concerned by a proposal requiring banks to hold additional common equity tier-one capital to meet higher loss absorbency requirements under Basel III.

While national regulators have the authority to decide on the level of additional common equity tier-one capital, the proposed HLA would duplicate measures already implemented by GCC states, pushing costs higher, he said.

Most gulf banks are well capitalised. In the UAE, while the minimum tier-one capital ratio is 8 percent, the actual ratio is 14.5 percent.

Although banks in the region are well capitalised and Basel II implementation is widespread, challenges remain, said Andres Portilla, director, regulatory affairs department at the Institute of International Finance.

“The challenge regarding liquidity framework is likely but it all depends on revised standards and there is an urgent need for a well-coordinated implementation process,” he said.