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A coup for regulators

Last week, a group of regulators comprising nearly 30 countries known collectively as the Basel Committee noted that the world’s largest banks had nearly met the capital requirements within the Basel III regulatory framework.

Market forces have laid the impetus for banks’ to move closer towards the capital requirements that underpin the Basel rules, which are not in their entirety required to be met until 2019, as banks jostle to reassure the market they are financially stable.

The Committee said the worlds top 102 banks had a combined shortfall of €57.5 billion by June 2013, half the €115 billion shortfall shared at the end 2012.

As key financial jurisdictions in Europe and the US slowly begin to shift from a developmental stage of post-crisis regulation towards implementation, this is welcome news. But, will the same early-adoption process unfold for trading-focused regulation?

Although the agreed upon rules within MiFID II are still far from final as the European Securities and Markets Authority begins to whittle down to the finer details of the ‘level one’ regulation, across the Atlantic, the Dodd-Frank Act has picked up pace – but not with wholesale industry support.

If development of the Volcker Rule is any marker, the same set of market forces that have boosted Basel III’s initial take-up weighed down Volcker’s development as vested interest on the sell-side try to slow, and water down, overall progress.

The banks – many of which operate large-scale trading operations – will no doubt favour the reputational elements of capital requirements compared to the nitty-gritty operational aspects of trading-related rules.