The Basel III regulations do not go far enough, and banks are being given too much time to implement them, Grigorii Marchenko, governor of the National Bank of Kazakhstan, has said.
Kazakhstan adopted the Basel I regulations in 1996, “and for 16 years we always considered that international regulations should be introduced in Kazakhstan across the board”, Marchenko told Emerging Markets.
When the BIS moved to Basel II, “we didn’t like it. We believed too much reliance on banks’ internal models, and on rating agencies.” The 2008 financial crisis bore out such fears, Marchenko argued – “and that’s why we fully supported the idea of developing Basel III”.
Kazakhstan said that the Basel III proposals made in June last year at the BIS annual meeting were “quite sensible. But then they were diluted, because of strong pressure from the banking lobby.”
Outstanding problems include the fact that the global liquidity standard, which would be one of the ratios banks would use, has not been “finalized”. He also said that “sensible proposals” on dealing with institutions that were deemed “too big to fail” had not adopted.
“Especially the ideas about cross-border resolution, that is, if a large multinational institution is going down, how do you do the resolution?” he said. “So we believe that Basel III didn’t go far enough, and we believe that it gives a great deal of time.”
Kazakh banks agreed regulations should be adopted on 1 January 2013 although the Basel committee has set a 2019 deadline. “So if a relatively small economy like Kazakhstan can adopt Basel III, why can’t they do that in the developed countries of north America and western Europe?”
Asked about reform of the IMF’s currency, the special drawing right (SDR), Marchenko said: “We would support the yuan and ruble both being included, for obvious reasons.”
Both Russia and China were major neighbours and trading partners, “but more than 90% of trade with Russia, and more than 99% of trade with China, is in dollars. This is for historical and psychological reasons.
“Many of these things could change for the better, in the sense that people would more frequently use yuan and rubles in the foreign trade of these countries.
“But we need the euro, along with dollar, yen, yuan and Russian ruble. We are clearly moving to an era of multi currency. Monopoly is always bad; oligopoly is not much better but if there is fair competition, it’s better.”
Asked whether full convertibility of the yuan was a precondition for movement in this direction, Marchenko said: “If China and the IMF sit down and discuss guarantees and arrangements that IMF requires they could reach some agreement or trade-off.”
Marchenko opposed calls for the vacant IMF director’s job to be filled from Europe. The US-European leadership duopoly at the fund and the World Bank “has worked for 60 years, but it’s time that it changed. A candidate from China, India or another large emerging market should be put forward.”
Marchenko said that the developing world would only have a chance if it united around one candidate, but that it would be “very difficult to find someone acceptable” to Russia, China, India and Brazil, who all have different views.