A global forum of banking regulators has finished its yearslong work on rules that aim to keep weak banks from needing taxpayer bailouts and setting off financial crises like the one that led to the Great Recession.
Regulators from around the world polished off the final set of new regulations for banks in Frankfurt on Thursday, the Basel Committee on Banking Supervision said in a statement, closing a saga begun at the height of the financial crisis.
A key part of the rules is a limit on how far banks should be allowed to diverge from regulators' assessments of how risky their holdings are.
European Central Bank head Mario Draghi, who heads the Basel Committee's oversight board, said Thursday that the step was "a major milestone that will make the capital framework more robust". They increased the amount of capital banks had to hold as a financial buffer, as measured against the risks they had taken by extending loans like mortgages.
Top European Union officials first opposed the inclusion of this floor, then pushed for a level of 70 per cent of the result yielded by using a standard formula set by regulators. They also wanted to address the wide variability of results across banks, which raised concerns that lenders were gaming the rules. By reducing excessive variability in banks' risk-weighted assets, the agreement locks in the benefits of a resilient worldwide banking system, supported by a level playing field of common global standards.