Basel Eases Capital Hit From New Trading Book Rules for Banks

Revisions to global rules for bank trading books will result in a halving of the extra capital needed from January 2022 to cover risks from market price swings, the Basel Committee said on Monday.It marks a completion of a welter of changes introduced by Basel since taxpayers had to bail out undercapitalised lenders during the financial crisis a decade ago.Banks had lobbied heavily to persuade the Swiss-based group of banking supervisors from the world's main financial centers to water down the original plans for new capital requirements for trading books.Basel said in a statement that its oversight body, the Governors and Head of Supervision, chaired by European Central Bank President Mario Draghi, endorsed the revisions on Monday.The new rules will mean an average increase of about 22 percent in total market risk capital requirements for banks compared with existing rules. A framework published in 2016 would have resulted in a 40 percent hike.The change in overall capital held by most banks will be relatively modest, however, though some of the giant trading banks will suffer a bigger hit.The bulk of a bank's capital requirements cover the threat of souring loans, while market risk capital is far lower, at about 5 percent of the total.Basel revised its market risk capital rules after getting better data from banks so that regulators could ease the initially conservative approach they took in the draft rules. Basel Committee Secretary General William Coen said last April that regulators were being left with only a small sample of observations to make revisions.