Banks Comply With Basel III Before Final Rule

U.S. banks, working to comply with Basel III rules before they are final, are attracting new retail deposits to meet liquidity ratios and eliminating trust-preferred securities that will no longer count toward capital requirements, according to regulatory consultants.

The Basel III guidelines, which will be phased in between January 2013 and 2019, call on regulators globally to boost capital requirements for banks, limit what instruments count toward capital and force banks to rely more on equity than debt for funding. A key aspect is the liquidity ratio that requires banks to hold enough high-quality liquid assets to cover total net cash outflow for 30 days. This makes it ideal to hold retail deposits, including checking accounts, savings accounts and certificates of deposit.

The Federal Reserve, which voted June 8 to adopt several Basel III rules, has yet to release a proposal for how the liquidity ratio will be calculated in the U.S. Banks nonetheless are boosting retail deposits as a core source of funding or showing investors how the ratios might affect their books, said Fernando de la Mora, a banking and capital markets consultant with PricewaterhouseCoopers.

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