The Basel Committee on Banking Supervision reached an agreement Tuesday on new capital requirements for banks, but stopped short of giving details of the final proposal until a senior-level meeting was held this weekend.
Negotiators spent much of the day hammering out finalized capital and liquidity requirements that could be agreed upon during a meeting Sunday by the group of governors and heads of supervision.
Leaders of the Group of 20 nations are aiming to release a formal package at their meeting in Seoul in November.
"The goal was to have an agreement by today," said Karen Shaw Petrou, a partner at Federal Financial Analytics Inc., said Tuesday. "If that's not possible, then the senior-level people on [Sunday] will have to work out details so the final rules are advanced."
Markets may have to wait as late as Monday to find out details on the new requirements for banks, unless the committee provides further insight before then.
At press time the committee had not made any formal announcements.
For most of the day, it appeared the 27-member body would not reach an agreement. Observers noted sharp differences on critical issues, including the definition of capital, buffers and capital and leverage ratios.
Up until now, the committee has yet to formally agree on how much extra capital banks should be required to hold or on the length of time they will have to eliminate lower-quality capital from Tier 1.
"Even if there are differences, they don't want Basel III negotiations to fall apart," Petrou said.
A draft proposal from the Basel committee, which was leaked to the German weekly Die Zeit, suggests that requirements could be even tougher than initially expected.
Banks would be required to hold 9% of Tier 1 capital, including a minimum ratio of 6%, plus a conservation buffer of 3% to shore up funds in the event of tough economic times.
Additionally, banks could also be required to tack on a separate anticyclical capital buffer of 3%, which could end up lifting the Tier 1 capital requirement to 12% during boom times, the draft proposal said.
Regulators have previously required a Tier 1 ratio threshold of at least 4%.
There has also been speculation that capital requirements could reach as high as 16% if Tier 2 were also included, according to the draft proposal, which several news organizations cited.
Implementation of the rules has remained under wraps. According to the draft proposal, new capital rules could take effect as early as 2013, much sooner than previously expected.