Wall Street banks will not meet a January deadline to begin implementing new global capital rules, potentially handing New York (Frankfurt: A0DKRK - news) an advantage over London as the financial centres vie for dominance.
The US Treasury said that American banks are not yet ready to start the process of complying with the Basel III rules first agreed in 2010. The rules, which financial regulators in the US, Britain and Europe (Chicago Options: ^REURUSD - news) have signed up to, require banks to hold more capital and are designed to prevent governments having to bail out lenders again.
“Many industry participants have expressed concern that they may be subject to a final regulatory capital rule on January 1, 2013, without sufficient time to understand the rule or make the necessary systems changes,” the US Treasury said on Friday. The new rules have proved controversial, with critics claiming they discourage banks from making loans despite businesses struggling for funding as many economies see weak — or negative growth.
The US delay comes amid growing concern in London about the threats to its position as a world financial centre. A report this week from TheCityUK, a lobby group for the industry, urged the Government to do more to persuade financial firms to locate in London. It estimated that 85,000 jobs in the UK financial sector have been lost because of a decline in its relative competitiveness.
American authorities insisted they take “seriously our internationally agreed timing commitments regarding the implementation of Basel III.” However, the US Treasury did not give a date for when banks will start implementing them. The rules require banks to hold loss-absorbing capital that is equivalent to 7pc of the size of their risk-weighted assets.
For the world’s biggest banks, that ratio is 9.5pc. US banks have battled against a rapid enforcement of the rules. Last year, Jamie Dimon, chief executive of JP Morgan (KOSDAQ: 019990.KQ - news) , denounced the Basel III rules as “anti-American” and said the US should consider withdrawing from the Basel Committee on Banking Supervision.