Minimal impact for Irish banks as Basel III agreed

Financial regulators have reached a deal to harmonise global banking rules, capping a decade of effort to make banks more resilient, even if they fall short of their own initial hopes.

Facing fierce opposition from the banking industry and calls from the US administration to backtrack on some measures, policymakers struck a compromise agreement on rules forcing banks to hold more capital and cash to avoid a repeat of the 2008 financial crash.

Conceived in the aftermath of the global financial crisis when taxpayers had to rescue some of the world’s biggest lenders, the rules, known as Basel III, aim to shield governments by having private investors suffer losses first.

The final step in the deal will be for legislators around the globe to ratify the agreement, another potentially time-consuming exercise, especially after some US lawmakers argued for relaxing financial regulation.

The compromise focused on when banks would have to increase capital on their trading books and on the way large lenders self-assess the risks they take — two issues that divided countries on either side of the Atlantic.

“From an Irish bank perspective the revisions to Basel III have, to an extent, been superseded by the [ECB’s] target review of internal models (TRIM) on Irish residential mortgage portfolios,” said Davy’s Diarmaid Sheridan.

“Both Bank of Ireland and Permanent TSB are currently undergoing the TRIM process and have increased risk-weighted densities on their mortgage portfolios, with further increases likely. AIB will undergo TRIM in the first quarter of 2018,” he added.

Additional reporting by Irish Examiner staff



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