Basel II

The Institute for International Finance (IIF), which represents the world's largest banks, has warned that any delays in the implementation of the Basel II capital accord in the US, and inconsistent adoption in other areas, could undermine the benefits of the framework and prevent a level playing field.

The warning comes in a report released by the IIF, which represents over 320 banks worldwide.

The Basel II framework was supposed to be implemented globally by the beginning of 2008, but US regulators said in October that they would delay implementation of the rules by a year.

Daniel Bouton, chairman and chief executive of Société Générale, and chairman of the IIF steering committee on regulatory capital who wrote the report, says there is substantial concern about the different implementation schedules set for various jurisdictions.

Says Bouton: "We believe that adoption of inconsistent versions of the Accord could ultimately disrupt the successful implementation of Basel II, undermine its basic fabric and create serious level playing field issues."

Bouton also says there has not been clear guidance as to how the practical implications of staggered implementation will be addressed: "Given the current state of the Basel II implementation plans of internationally active banks, it is important that international regulators coordinate their efforts in order to provide clarity in these areas swiftly."

Last month the American Bankers Association (ABA) also expressed concern over the decision to delay implementation of the Accord, saying that US institutions will be at a disadvantage to banks that have met the agreed timeframes.

Sources:
"Banks warn over Basel delay" http://news.ft.com/cms/s/e90942ce-557f-11da-96fc-00000e25118c,ft_acl=,s01=2.html
"SG chief warns of dangers in delaying Basel II" today.reuters.com/investing/FinanceArticle.aspx?type=governmentFilingsNews&storyID=URI%3aurn%3anewsml%3areuters.com%3a20051114%3aMTFH39242_2005-11-14_18-31-43_L14256729%3a1