The drafting of the new Basel II capital adequacy rules for banks has been criticised by John Tiner, chief executive of the Financial Services Authority (FSA). The head of the UK’s financial regulator expressed concern at a conference in London that securities regulators were not consulted prior to the drafting of the Accord. ‘It is clearly unsatisfactory that the banking regulators alone should set standards for capital adequacy that then need to be adopted by securities regulators,’ he said, according to a report in the FT. The Basel Committee has allowed super-regulators such as the FSA to work alongside central bankers in drafting Basel II, but, in the US, only bank regulators such as the Federal Reserve and the Controller of the Currency are represented. The notable absence of the Securities and Exchange Commission (SEC) had caused a number of problems as the SEC is introducing new capital adequacy rules aimed at broker/dealers, said Tiner. These proposals differ in a number of key areas, most notably as the SEC rules may allow long-term non-subordinated debt to count as capital. ‘If permitted this would clearly set a substantially lower standard for available capital than applies under Basel,’ explained Tiner.
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