Basel rules harsh on `Too Important to Fail' banks: Ackermann

Capital controls based on the Basel liquidity norms could handicap "systemically important" banks in providing basic services, Deutsche Bank chief executive Josef Ackermann and chairman of the Institute of International Finance (IIF), has said.

The new standards, agreed to by the Basel Committee of banking supervisors and central bankers in the wake of the global financial crisis, prescribe a series of liquidity measures for banks aimed at reducing risk appetite and curbing speculation.

The Group of 20 leading economies, that include the seven major industrialised countries and major emerging and developing economies, is expected to reach an agreement on extra safeguards for systemically important financial institutions (SIFIs) when they meet in November.

The G-20 has agreed on tighter capital norms for the world's biggest banks and the finance ministers and supervisors are sure to spread the net wider to avoid a repeat of the crisis.

The move will markedly reduce banks' incentive to take excessive risks, lower the likelihood and severity of future crises, and enable banks to withstand - without extraordinary government support - stresses of a magnitude associated with the recent financial crisis.
 
Ackermann cited the progress made in setting policies for executive compensation as a major achievement, although he said more needed to be done to put financial industry on a firmer footing.

Ackermann, who heads industry trade group IIF, said regulators need to have more "consistency and clarity" in implementing regulatory proposals for the financial industry, which faces tighter capital controls and other rules in the wake of the financial crisis.