Nedbank CEO Mike Brown. Picture: FINANCIAL MAIL
Nedbank CEO Mike Brown. Picture: FINANCIAL MAIL

SOUTH AFRICA is one of the 11 Basel Committee member countries that would be ready to implement tougher capital rules for banks from next month.

Africa’s largest economy has finalised its set of rules which were submitted for approval to Finance Minister, Pravin Gordhan.

The country’s banks join those from Japan, Switzerland and Singapore among other countries that have also raised their capital buffers under the Basel rules, the Basel Committee on Banking Supervision said last week a progress report.

The report was issued after the committee met last Thursday and Friday to discuss progress of its members in implementing capital adequacy reforms which were meant to strengthen bank balance sheets.

The reforms require global banks to at least triple their capital buffers in stages until 2019. Mike Brown, Nedbank CEO said last week that South African banks have always had strong capital buffers even during the last global financial crisis.

Local banks have however continued to add more capital to their balance sheets even though they have struggled to comply with the liquidity coverage ratio (LCR).

The LCR requires banks to have a buffer of easily saleable assets or highly-rated bonds from 2015 to withstand any sustained run on deposits for a period of up to 30 days without government assistance.

However, the Reserve Bank has created a stand-by facility to allow the banks to borrow — at a cost likely to be passed on to borrowers — a portion of their liquidity shortfall.

In its report, the Basel Committee it had been actively monitoring "on a continuing basis" the progress of members in implementing the Basel III package of regulatory reforms, as well as the implementation of Basel 2 and Basel 2.5.

"The number of member jurisdictions that have published the final set of Basel III regulations effective from the start date of January 1, 2013 is 11. These include Australia, Canada, China, Hong Kong SAR, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa and Switzerland," the committee said.

"Seven other jurisdictions — Argentina, Brazil, the European Union, Indonesia, Korea, Russia and the US — have issued draft regulations, and have indicated they are working towards issuing final versions as quickly as possible. Turkey will issue draft regulations early in 2013," it said.

Some major banks in Europe and the US have however said they would not be able to meet next month’s deadline for capital reforms but the Basel Committee has insisted this would not derail their implementation.

Stefan Ingves, chairman of the Basel Committee said last week: "While some jurisdictions have not been able to meet the planned start date, a large number will be ready to begin introducing the new capital requirements as planned on January 1 2013."

He said the globally agreed timeline included a number of milestones from next year to 2019, designed to provide for a gradual phasing in of the new capital requirements.