US to Propose Revisions to Basel Rules

Background: Basel Accords

The Basel Accords are a set of international banking regulations that aim to ensure the safety and soundness of the global banking system. They were developed by the Basel Committee on Banking Supervision (BCBS), which is a group of central bank governors and bank supervisors from 28 countries. The Accords set out minimum capital requirements for banks, as well as other prudential regulations.

Proposed Revisions

According to Bloomberg, the US plans to propose revisions to the Basel rules this month. The proposed revisions are intended to address concerns about the complexity and procyclicality of the current rules. Complexity refers to the difficulty of understanding and implementing the rules, while procyclicality refers to the tendency of the rules to amplify economic cycles.

Key Changes

The proposed revisions include a number of key changes, such as: * Simplifying the calculation of risk-weighted assets * Reducing the reliance on external credit ratings * Introducing a new leverage ratio requirement * Strengthening the requirements for global systemically important banks (G-SIBs)

Impact of the Revisions

The proposed revisions are likely to have a significant impact on the global banking system. They could lead to higher capital requirements for banks, which could in turn reduce lending. They could also make it more difficult for banks to meet the requirements for G-SIBs, which could lead to a reduction in the number of G-SIBs.

Conclusion

The proposed revisions to the Basel rules are a significant development that could have a major impact on the global banking system. It is important to note that the proposed revisions are still subject to change, and it is not yet clear when they will be finalized. However, it is clear that the US is taking a leading role in reforming the Basel rules, and that the proposed revisions are likely to be a major topic of discussion at the upcoming G20 summit.