Global banking regulators, The Basel Committee, have recently agreed to relax international banking rules that were to go into effect in 2015. The original rules were worked out and agreed upon even before the worldwide economic collapse of 2008. The committee and some analysts say the new relaxed rules will give banks
...four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow.
and will
...widen the range of assets banks can put in the buffer to include shares and retail mortgage-backed securities (RMBS), as well as lower rated company bonds.
The banks will be given an extra 4 years to comply fully with the new rules.
They are part of the so-called Basel III package of reforms. That package will require lenders to increase their highest-quality capital—such as equity and cash reserves—gradually from 2 percent of the risky assets they hold to 7 percent by 2019.
However, the new rules are seen by some analysts as more of a return to the status quo that led to some of the banks' earlier problems. There is also the suspicion that some of the amended regulations may lead to even more serious consequences, due to the pull-back on rules which determine what types of "highest-quality" liquid assets banks are allowed to hold to get them through a monetary crisis.
From BBC Business Editor, Robert Peston --
Perhaps the most striking characteristics of today's agreement - which amends a draft first published in 2010 - is that banks will be allowed to include corporate bonds, some shares and high-quality residential mortgage backed securities in their permitted stocks of liquid assets.
This goes against the grain of central banking and regulatory orthodoxy. In particular, the inclusion of mortgage-backed securities will be seen by some as odd, since these proved to be wholly illiquid and unsellable in the summer of 2007.
So while, technically, banks will be more fully funding their liquid assets to meet tougher capital requirements, some of those assets may not be safe enough to guarantee their being there in the event of another financial collapse similar to the one that led to the recent "Great Recession."
This seems to me to be another win for the bankers, plutocrats, and other 1%'ers -- and something that gets us closer to the great Ponzi scheme that was responsible for the last global finacial meltdown. I hope that's not the case.
There are others here at DKos who have a lot more expertise in finance and macro-economics than I do, and I would love to hear from them in the comments or even see other diaries on these and related issues.
