The group of policymakers that oversees the Basel Committee has endorsed the committee’s regulatory reform efforts, and calls on it to finalize the details of the proposed reforms by the end of the year.

The oversight body for the Basel Committee on Banking Supervision, known as the Group of Central Bank Governors and Heads of Supervision, met yesterday at the Bank for International Settlements, and welcomed the progress that has been made by the Basel Committee at turning the group’s agreements on regulatory reforms into a concrete package of measures.

The latest proposals from the committee were released in mid-December, calling for larger capital requirements, higher quality capital reserves, a maximum leverage ratio, and minimum liquidity requirements. However, those proposals were somewhat short on specifics.

On Monday, the group of policymakers requested that the committee “deliver a fully calibrated and finalized package of reforms by the end of this year.”

European Central Bank president, Jean-Claude Trichet, who chairs the group, emphasised that “timely completion of the Basel Committee reform programme is critical to achieving a more resilient banking system that can support sound economic growth over the long term.”

Additionally, the group stressed the importance of making progress in the several other key areas. In particular, it called on accounting standards setters and supervisors to develop “a truly robust provisioning approach based on expected losses”, and it set out several principles to guide development of that approach, indicating that the Basel Committee should translate these principles into a practical proposal by its March meeting for consideration by both supervisors and accounting standards setters.

They also provided guidance on: introducing a framework of countercyclical capital buffers; addressing the risk of systemic banking institutions; and, the possible role of contingent capital in the regulatory capital framework.

The governors and heads of supervision stressed that “the aim of the new global standards should be to achieve a better balance between banking sector stability and sustainable credit growth.”

The final set of standards is expected to be developed by the end of 2010, to be phased in as financial conditions improve and the economic recovery is assured, with the aim of implementation by the end of 2012.

IE