To protect economy, bank rules phase in

NEW YORK — Regulators and central bankers on Sunday gave banks around the world more time to meet new rules aimed at preventing financial crises, saying they wanted to avoid the possibility of damaging the economic recovery.

The rules are meant to ensure banks have enough liquid assets to survive the kind of market chaos that followed the collapse of Lehman Bros. in 2008. Meeting in Basel, Switzerland, the committee, made up of bank regulators from 26 countries, also loosened the definition of liquid assets.


The decision takes some pressure off banks, which have complained the regulations would throttle lending and hurt economic growth.

Mervyn A. King, governor of the Bank of England and chairman of the group, said there was no intent to go easier on lenders. ‘‘Nobody set out to make it stronger or weaker,’’ he said of the rules in a conference call with reporters, ‘‘but to make it more realistic.’’

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Still, the decision was a concession from authors of the so-called Basel III rules that the regulations could hurt growth if applied too rigorously. It was endorsed unanimously by the participants, including Ben S. Bernanke, chairman of the Federal Reserve, and Mario Draghi, president of the European Central Bank.

The rules, drafted by the Basel Committee on Banking Supervision, are not binding on individual countries, but there is international pressure for countries to comply.

Much of the debate so far has focused on increasing the amount of capital that banks hold in reserve to absorb losses. After Lehman’s collapse, trust among financial institutions evaporated and banks refused to lend to one another. Many banks discovered that they did not have enough cash or readily salable assets to meet short-term obligations. In some cases, banks that were otherwise solvent faced collapse.


The rules require banks to have enough cash or liquid assets to survive a 30-day crisis, like a run on deposits or a credit rating downgrade. They will not take full effect on Jan. 1, 2015, as planned, but will be phased in through Jan. 1, 2019.

A so-called liquidity coverage ratio defines liquid assets; the assets cannot be already pledged as collateral, for example, and must be under control of a bank’s central treasury, so it can act quickly to raise cash.

Banks will be allowed to use securities backed by mortgages to meet a portion of the requirement. A large majority of big banks already meet the requirements.

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