We had another interesting month.
To hope that some of the Basel iii rules will be more flexible is one thing. The belief that the Basel iii rules are anti-American is another.
Jamie Dimon, the Chief Executive Officer of J.P. Morgan finds the Basel III rules "anti-American."
In an interview with Financial Times, Dimon said:
"I'm very close to thinking the U.S. shouldn't be in Basel anymore. I would not have agreed to rules that are blatantly anti-American".
Mr Dimon has now some new friends and some new enemies. The Street columnist Glenn Hall, for example, said: "Jamie Dimon appears to be suffering from a form of delusional paranoia that makes him believe everyone is out to get his bank."
Jean-Claude Trichet, the head of the European Central Bank, had another point of view:
“I see resistance of some in the financial sector against Basel III. For me, it is crystal clear: what has been decided is decided”
So, what should Mr Dimon say?
I believe he should say that European banks can use different accounting and modeling principles, and they may have a competitive advantage, so the American regulators must ensure that the standards in the States are similar to the European ones.
But there is no point to attach to the Basel iii framework, that already has been endorsed not only by the States, but also by the G20 leaders.
At the other part of the world, the Australian Prudential Regulation Authority announced a proposal that would require Australian banks to adopt the minimum capital requirement ratio two years ahead of the Basel iii timetable.
Also, they would implement the capital conservation buffer three years ahead of the Basel III’s schedule.
Of course the Australian Bankers’ Association (ABA) does not like the idea of the accelerated timeline (no, they have not called it Anti-Australian yet).
In China, systemically important banks will be subject to a minimum capital adequacy ratio (CAR) of 11.5 percent; other banking institutions will be required to adhere to a minimum CAR of 10.5 percent.
We also had the next hit for the investment banking sector. UBS trader Kweku Adoboli is accused of fraud and two charges of false accounting.
The Financial Services Authority and its Swiss counterpart have asked for a "comprehensive, independent investigation" into the events that led to the trading losses at the bank's London operations.
Chancellor George Osborne found the opportunity to support the unique and very strict new measures in UK, AND speak about the need for a shake up of the banking sector in Britain.
Oh, not another hit.
He said: “I draw two lessons. One is we need a better system of regulation, and that is why the British Government is proposing to give to the Bank of England much greater powers of supervision, so it can look across the piece at issues of stability and proper conduct in our banking system, and indeed we will have a financial conduct authority specifically looking at market abuse. ”
“But also I take the lesson that John Vickers drew to our attention a few days ago which was: how do you protect retail banking from those kinds of activities in investment banking that we saw at UBS this week? ”
“If you ever wanted a better example of why the kinds of ideas that John Vickers was putting forward were right for Britain, look at what happened at UBS just a few days later.”
The FSA and the Swiss Financial Market Supervisory Authority said a third party would investigate the details of the alleged unauthorised trading activity and why the activities remained undetected.
IMF Working Paper, August 2011
Possible Unintended Consequences of Basel III and Solvency II
Prepared by Ahmed Al-Darwish, Michael Hafeman, Gregorio Impavido, Malcolm Kemp, and Padraic O’Malley
Efforts to strengthen the quality of capital for banks and insurers through Basel III and Solvency II are well advanced.
On the one hand, the Basel Committee on Banking Supervision (BCBS), the organization responsible for developing international standards for banking supervision, adopted the Basel II framework in 2004 and, in response to the financial crisis, has taken steps to strengthen it in an incremental fashion to form what is now known the Basel III framework (BCBS 2009, 2011a, 2011b, and 2011c).
On the other hand, the European Commission (EC) is leading the Solvency II project, in close cooperation with the European Insurance and Occupational Pensions Authority (EIOPA), to develop harmonized standards for insurance supervision within the European Union.
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About the Author
George has more than 17,000 hours experience as a professional speaker and seminar leader. He has worked for more than 15 years as a management consultant and educator and has demonstrated exceptional presentation and communication skills.
George is the president of the Basel ii Compliance Professionals Association (BCPA, www.basel-ii-association.com), the largest association of Basel ii professionals in the world, and the Basel iii Compliance Professionals Association (BiiiCPA, www.basel-iii-association.com), the largest association of Basel iii professionals in the world.
George is also president of the Sarbanes Oxley Compliance Professionals Association (SOXCPA, www.sarbanes-oxley-association.com), the largest Association of Sarbanes Oxley professionals in the world
George is an expert witness, qualified to investigate and testify about risk and compliance management standards, policies, procedures, best practices, due care and due diligence.