The expectation—or hope, in some cases—that the global financial crisis would eventually lead to stricter regulation and tighter capital rules for banks was a bit of a no-brainer. Banks had thrown caution to the winds in the bubble years and had to be bailed out with trillions of dollars of public money.
International regulators in the Basel Committee on Banking Supervision have said in a Thursday statement that banks would have to set aside more capital than before to protect themselves against downturns—and hopefully prevent a repeat of the recent past. They have also proposed limits on leverage and to move derivative exposures to central counterparties.
While the rules are surely more stringent, national regulators have offered the freedom to not implement them till economies recover from the current downturn.
Indian banks need not worry about leverage limits and the new rules on derivate exposure. But our banks need more capital to back lending and meet current capital norms. The new rules will likely add to these pressures.