The Basel Committee on Banking Supervision has published a package of proposed reforms designed to strengthen global capital and liquidity regulations.

The committee approved the proposed measures for consultation at its December 8-9 meeting, and published them Thursday.

Comments on the proposals are due by April 16, 2010, and an impact assessment will also be carried out in the first half of next year, with the idea that final reforms will be decided by the end of 2010 and implemented by the end of 2012.

Among other things, the proposals aim to:

• raise the quality, consistency and transparency of banks’ capital;
• strengthen the capital requirements for counterparty credit risk exposures;
• introduce a leverage ratio;
• introduce a series of measures intended to create a more countercyclical capital framework; and,
• impose a global minimum liquidity standard for internationally active banks.

The committee adds that it is also reviewing the need for additional capital, liquidity or other supervisory measures “to reduce the externalities created by systemically important institutions.”

Nout Wellink, chairman of the Basel Committee and president of the Netherlands Bank, stated that, “the capital and liquidity proposals will result in more resilient banks and a sounder banking and financial system. They will promote a better balance between financial innovation and sustainable growth.”

IE