The world’s top bank regulator said on Wednesday it proposes to tighten rules and raise the cost of issuing and trading risky securities, giving a clear signal that supervisors are cracking down following the subprime crisis.
The Basel Committee on Banking Supervision laid out a roadmap for new regulations, saying it would attempt to close the gaps in the global rules framework that were exposed by billions of dollars of shock losses in the financial crisis.
The moves will undoubtedly raise the cost of doing banking, including that of issuing and owning structured, asset-backed securities, but also for trading overall.
The committee also aims to see banks secure safer sources of liquidity to keep their day-to-day operations flowing smoothly after several banks, including Northern Rock in Britain and Bear Stearns in the United States, suffered crises that threatened to derail the global financial system.
“Supervisors cannot predict the next crisis but they can carry forward the lessons from recent events to promote a more resilient banking system that can weather shocks, whatever the source,” said Basel Committee Chairman Nout Wellink in a statement.
The move comes after a push by leading G7 governments to tighten regulations on banks following hundreds of billions of dollars in losses that have tightened credit conditions for businesses and families and threaten to push the U.S. economy into a recession.
Banks have lobbied hard for regulators to take a light approach, saying they aim to put their own houses in order first.
(Reporting by Thomas Atkins; Editing by Gerrard Raven)