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BIS proposes new measures to tighten bank supervision/BWorld/1.19.09

GENEVA — The world’s biggest central banking body last Friday proposed new measures to tighten "Basel II" supervision of banks in a bid to close gaps exposed by the financial crisis.

"These enhancements are part of a broader effort... undertaken to strengthen the regulation and supervision of internationally active banks in light of weaknesses revealed by the financial markets crisis," said the Basel-based Bank for International Settlements (BIS).

Under the proposed measures, banks would be required to make more detailed disclosures of their exposure to complex products such as asset-backed securities, thereby giving more information on their risk profile.

In addition, they would have to adhere to requirements on capital that would cover exposures to complex financial products and illiquid assets.

"The proposed enhancements will help ensure that the risks inherent in banks’ portfolios related to trading activities, securitizations and exposures to off-balance sheet vehicles are better reflected in minimum capital requirements, risk management practices and accompanying disclosures to the public," said Nout Wellink, chairman of the Basel Committee.

Mr. Wellink recently blamed the financial crisis on insufficient regulation and weak risk management in financial institutions.

This lack of regulation, coupled with abundant credit and "fundamental shortcomings in financial institutions’ governance," led to the current crisis, which has seen the collapse of Wall Street giants such as Lehman Brothers and unprecedented state intervention in the financial markets, he told a conference in China.

Banks and interested parties have until April 17 to submit comments on the new proposals. — AFP