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Law360, London (April 2, 2020, 12:10 PM BST) -- The government gave its backing on Thursday for a delay to a package of global capital rules, saying that pushing back the onerous requirements for a year will allow banks to focus on keeping the financial system stable during the COVID-19 crisis.
HM Treasury and the Prudential Regulation Authority backed a delay announced by the Basel Committee on Banking Standards on Friday. The global group of regulators, which writes rules for banks worldwide, pushed back the implementation date of the so-called Basel III standards until January 2023.
Lenders were due to begin following the rules in January 2022. But the committee's oversight group has said that the deferral will allow banks to concentrate on keeping themselves afloat and lending during the coronavirus crisis.
The Treasury and the PRA - the Bank of England's regulatory arm - said in a joint statement on Thursday that the delay will provide "operational capacity for banks and supervisors to respond to the immediate financial stability priorities from the impact of COVID-19."
The government added that it remains committed to implementing the standards on time.
The Basel Committee introduced the measures in response to the last financial crisis, which exposed shortcomings in the way it had managed threats to the market.
The voluntary framework is designed to boost the amount of capital that banks are required to hold by making them increase liquidity and reduce leverage. Lawmakers hope to improve the sector's ability to absorb shocks arising from financial and economic stress.They also aim to improve risk management and governance at banks and increase transparency and disclosures.
The incoming rules include sections that deal with credit risk, operational risk and market risk — which are informally known as Basel IV. The Basel committee said Friday that this part of the package will also be pushed back from 2022 to 2023.
And the so-called output floor, which aims to bring in a standard approach for banks to calculate how much capital they must hold, will also be delayed by a year to January 2028.
The Bank of England has already removed domestic capital rules for banks. The central bank in March temporarily removed the countercyclical capital buffer for banks for at least 12 months to release £190 million ($233 million) into the economy.
--Editing by Ed Harris.
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