New reforms being finalised by the Basel committee have angered the banking industry and provoked strong reactions from European governments. The world’s top bank regulator, made up of members from nearly 30 countries is being accused of being too zealous in its legislation, in a move many believe will stifle the industry. It is believed the new rules called ‘Basel IV’ will require banks to increase their capital, making it harder for them to lend, a concern shared by banks and their governments alike. Deutsche Bank has already made its fears known, saying it believes the new legislation is scaring investors and would make bank forecasting models redundant. The Secretary-General of the Basel Committee, William Coen denied these accusations. He told reporters their plan was not to increase capital, nor to frighten investors.
This meeting of the committee is a continuation of the work they have been doing since the financial crash, to stabilise the industry and restore consumer confidence. The rules will ensure that lending institutions use similar models for risk-assessment in order to prevent discrepancies. The different measuring tools adapted have allowed banks vary the amount of capital they hold, thus subjecting the system to abuse. The committee urged banks to be patient until the rules are finalised. Coen said the new agenda is being field-tested and undergoing rigorous assessments by industry experts to ensure they work as planned. The European Union fears the new rules will result in a significant increase in capital requirements for its banks, thus affecting the stability of its economy. The Basel Committee said the rules might require some banks to increase their capital, but not by much. The rules to be finalised this year may not be put into effect until 2019.