CISI Comments on Basel Committee Proposals on Banking Sector Resilience

The Chartered Institute for Securities & Investment (CISI) Risk Forum has submitted its comments on the Basel Committee on Banking Supervision consultative document on strengthening the resilience of the banking sector.

The CISI Risk Forum, while agreeing with the overall direction, has significant concerns with much of the content. It was concerned at the difficult and unnecessarily complex nature of the paper, which should be written in plain English, avoiding jargon. The CISI Forum found this particular paper difficult to understand, which is surprising given that the 35 forum members who commented on this consultative document are buy- and sell-side risk specialists.

The forum states that it has concerns that many global regulators will not understand these new rules and that, while they are well intentioned, they are poorly conceived. In some areas, high-level principles are included whereas in other cases an inappropriate level of detail is provided.

The CISI forum is also concerned that many of the changes recommended will essentially be cosmetic and are actually nothing to do with the financial crisis. They note that there is no evidence that the suggestions have been properly analysed to see what their impacts would be and whether they would have assisted with the crisis.

For example, under Capital Structure, para 85 page 17, there was concern about the ‘one size fits all’ approach, the dominance of equity and the overly complicated nature of the rules. In addition, the forum did not support the Bond Equivalent Approach (Para 125) and said its underlying objective appears wrong in principal with the inappropriate size criteria raised as a concern.

Dennis Cox, chairman of the CISI Risk Forum, said: “The buy-side of the business is rarely considered when the BIS produces it rules. Looking at these new rules we have generally taken the view that, whilst they are well meaning, they will fail to achieve their objectives and could be significantly improved in a number of areas.”


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