The Corner | The Basel committee intends to impose new capital requirements on the banks relating to off-balance sheet assets. The purpose of the international organisation’s move is to mitigate the risk of a bailout of financial products like investment funds and/or securitisations. Although these are off the banks’ balance sheets, there exists a reputational risk: these products are usually managed by investment management companies which are subsidiaries of the banks.
In the opinion of Bankinter analysts, Basel recognises that the banks are not obliged to bailout these funds. But it also believes that the reputational risk can be an incentive for a voluntary bailout, so for this reason the committee wants to implement new capital requirements. The amount is still not known. According to Bankinter:
“If Basel’s proposal is implemented, the most likely thing is that the new capital requirements are established in accordance with the volume of assets under management, as well as their risk level. From our point of view, the institutions which will be most affected would be those with greater exposure to asset management like UBS, Credit Suisse, Deutsche Bank, BNP, SocGen and Intesa.”
Currently around 32 entities, including BBVA and Santander, have expressed their non-conformity with the regulatory proposal. Amongst other factors, they flag the reduced probability of a bailout happening, as well as the possibility of revising the legal relationship between the fund management companies and the banks.