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Marketplace Morning Report

Banking industry readies for Basel

Bob Moon Jul 12, 2010
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Steve Chiotakis: In this country, the banking industry seems to have successfully softened the sting from Washington’s financial reform crackdown. But there could be tougher rules yet to come from a little town in Switzerland called Basel. That’s where a committee representing nearly 30 countries meets later this week. Here’s Marketplace senior business correspondent Bob Moon.


Bob Moon: I won’t even bother with the panel’s fancy 14-word-long title, but its first goal is “Enhancing the Resilience of the Banking Sector.” Financial markets, though, are already showing jitters over what might come out of the gathering. At Institutional Risk Analytics, Christopher Whalen says it’s little wonder, given the committee’s last round of rulemaking in 2004:

CHRISTOPHER WHALEN: The Basel II framework gave us the pretense that you could, in fact, regulate things like credit-default swaps, which are really impossible to price or regulate correctly.

Whalen argues this round, aimed at fixing things, is no different:

WHALEN: Ultimately, what Basel is about is convincing us these large global enterprises can be managed effectively — essentially trying to put lipstick on the pig. But it’s still a pig.

Some analysts are warning the committee could end up burdening the banks at just the wrong time, making it even tougher to find a loan. Global regulators have been hinting they want banks to hold on to significantly more capital, so governments won’t have to come to the rescue again.

I’m Bob Moon for Marketplace.

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