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Global regulators say tougher bank rules do not curb lending

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By Huw Jones

LONDON (Reuters) – Far higher bank capital requirements introduced after the financial crisis a decade ago dampened lending to small companies only briefly and therefore no rule changes are needed, the Financial Stability Board (FSB) said on Friday.

The body that coordinates financial rules for the Group of 20 Economies (G20) analysed how the initial batch of tougher “Basel III” capital rules in 2010 affected the ability of banks to keep lending to small and medium sized companies.

Banks have said that the effective tripling of capital requirements would make it harder to keeping lending to companies at the same pace.

The FSB assessment on Friday showed that lending has not regained pre-financial crisis levels in some jurisdictions.

FSB Vice Chair Klaas Knot, who also heads the Dutch central bank, said Basel III has had only a temporary impact on bank lending, and mainly at less capitalised lenders as they built up their buffers.

The general state of the economy and public policy are the main drivers of lending, Knot told reporters.

“Based on this evaluation at the level of the FSB, I do not anticipate any review, revisiting of the current rules,” Knot said.

The European Union diverged from Basel rules by introducing lower capital requirements on SME loans, though the bloc’s own banking watchdog found in 2016 that the so-called “SME supporting factor” had not led to extra lending.

Knot said those who sign up to global rules should apply them in a consistent way and he would be cautious about using cuts in capital requirements as a tool to encourage lending given there were levers like public intervention.

However, international consensus appears to be moving towards the EU approach, Knot said.

The FSB assessment is being presented to a meeting of G20 ministers and central bankers in Japan on Saturday, and being put out for public comment.

(Reporting by Huw Jones, editing by Louise Heavens)

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