IMF warns of collapse of major banks because of Basel 3

IMF warns of collapse of major banks because of Basel 3
He stressed that the global financial system remains fragile


Wednesday, November 10, 1433 - September 26, 2012



Monetary Fund warned of the repercussions of committing banks to raise their capital


London - Arab News
International Monetary Fund warned that the standards "Basel 3", which was approved in Switzerland recently may result in more of the world's major banks to collapse, rather than protecting the light of the global economic crisis. It is assumed that the banks start in the world to be bound by these new standards as of the year 2015 They include broad structural reforms of the banking sector in the world, including with regard to precautions mandatory for banks. newspaper "Financial Times" Wednesday 09/26/2012 British report issued by the International Monetary Fund that the standards "Basel 3" approved by lawmakers Financial Aalmeon may cause worsening crisis in major financial institutions, leading each to collapse, while struggling governments to rescue financial institutions from the financial crisis. Analysts said the International Monetary Fund said that "banking groups major has the features that make them better able to absorb the costs of regulatory standards new, this Groups may become more famous and privilege in the market, and the market itself will become more focused. " It was the decision makers the economic and financial in Basel had discussed forcing companies and financial institutions heads and financial reserves more to become better able to recover from any financial crisis facing the markets in the future. to Therefore, analysts added in the latest report on global financial stability issued by the International Monetary Fund, "The banks that have a large share in the activities of fixed incomes, and in the currency, and commodity markets will become more dominant on the market." and International Monetary Fund warned that the standards "Basel 3" will also raise the motivation of many financial institutions in order to circumvent the frameworks natural force in the banking systems. report warned tone and clear that "bind banks to raise their capital could put growth at bay." the IMF said in The report said the global financial system remains fragile four years after the collapse of Lehman Brothers in the United States fall of 2008. and continued: "reforms in the global financial system, including the Basel 3, moved" a bit in the right direction but they were not enough. " The IMF said, "Although there are some reforms, but some of the economy still has not seen significant changes."

IMF warns on Basel III rules


By Claire Jones and Brooke Masters in London
Rules aimed at curbing financial sector excess could drive more business to the biggest banks and make it even more difficult to allow the world’s largest lenders to fail, the International Monetary Fund has warned.

The IMF argued in a paper released on Tuesday that the Basel III rules – global regulators’ response to the financial crisis – would exacerbate the too-big-to-fail problem, where governments were forced to rescue financial institutions deemed so large, or interconnected, that their collapse would wreak havoc on the entire financial system.

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“Big banking groups with advantages of scale may be better able to absorb the costs of the regulations; as a result, they may become even more prominent in certain markets, making these markets more concentrated,” IMF analysts wrote in the chapter of its latest Global Financial Stability Report.

Critics less prominent than the IMF have raised this issue before. The Basel rulemakers have sought to address it by requiring companies deemed “systemically important” to hold more capital than their smaller and less connected rivals and to develop so-called “ living wills” that would make them easier to break up in a crisis.

However, the fund is concerned that banks that have a large share of the activity in fixed income, currencies and commodities markets in particular will become even more dominant. Citigroup, one of the largest US lenders, said earlier this month that it was launching a commodity trade finance business to capitalise on the pullback from the market by European lenders such as BNP Paribas.

The IMF cautioned that the rules were also raising the incentives to develop new products to circumvent the framework. There was also a “high chance” that the framework would push riskier activity into less regulated parts of the financial system.

“With non banks’ less regulated status and less intrusive supervision, new systemic risks may emerge,” the report said. The Financial Stability Board is due to report later this year on how best to address the issue of shadow banking.

The fund warned the global financial system was still fragile four years after Lehman Brothers’ failure in the autumn of 2008. Reforms, including Basel III, were moving the financial system “somewhat” in the right direction, but there had not yet been enough progress made.

“Despite improvements along some dimensions, and in some economies, the structure of intermediation remains largely unchanged,” the report said. “Financial systems are still overly complex, banking assets are concentrated, with strong domestic interbank linkages, and the too-important-to-fail issue is still unresolved.”

The fund acknowledged that this was, in part, because in many countries the reforms were only beginning to take root and that the pace of progress had been slowed by the continued need for government support of the financial system.

The IMF commended Basel III’s requirement that banks held more and better quality capital, saying this policy would support growth and make output less volatile.

The report warned that higher capital requirements could stymie growth, but only when capital buffers rose to a level in excess of 25 per cent of assets – more than three times the 7 per cent minimum requirement for core tier one capital under Basel III.

Looks like IMF is towing the banksters line...how the heck can BASELIII be bad? I guess they are waching the demise of their funny-money machine and getting desperate...