By Sven Egenter and John O’Donnell
ZURICH/BRUSSELS, Dec 17 (Reuters) – Banks face having to hoard more funds or turn to investors for fresh capital within as little as three years under proposals by a body which guides global financial regulation.
Seeking to prevent this year’s financial crisis from being repeated, the Basel Committee of central bankers and supervisors on Thursday demanded stricter rules for the capital which banks maintain to shield their depositors and shareholders from loss.
Although its recommendations are not binding, they herald a tougher regime for banks; regions such as the European Union will use them as a reference, and higher capital requirements may end up slowing down lending or investment banking business. On Thursday, the EU said it was studying the Basel report.
“There were a lot of areas in finance which were hardly regulated, such as investment banking,” said Rym Ayadi, an industry expert with the Centre for European Policy Studies, a think tank.
“If these new rules are implemented…this would be the end of that. It could change the way banks work, making them more focused on financing the real economy.”