Bank reform chief sees Basel compromise to limit pain

June 11, 2010

(Reuters) – A top central banker and regulator said some proposals in new capital rules for banks would be eased to ensure the industry can adjust to the new standards through retained earnings and reasonable fundraisings.

Nout Wellink, chairman of the Basel Committee and a member of the European Central Bank, also said on Friday that banks had been “too profitable” in the past and a major part of the industry faced a difficult period.

Wellink, speaking at a meeting of bank lobby group the Institute of International Finance, said certain capital deductions in draft proposals on new capital and liquidity rules — dubbed Basel III — needed to be toned down.

“We do realize, on the basis of quoted impact studies, that we have to compromise on certain elements … but I think we will find a very acceptable solution,” Wellink said about proposals to introduce a set of deductions and exclusions from common equity to calculate capital needs.

Banks have said the way the Basel Committee proposed to change rules on how minority shareholdings count toward capital calculations and the treatment of deferred taxes were among issues they would like watered down.

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