The International Chamber of Commerce (ICC) expressed its concern this week about possible unintended negative impacts of the Basel II Trade Finance rules. Though the idea behind these enhanced rules is to reduce the leverage of banks in the international financial system, an involuntary side-effect could be the reduction of credits and financial instruments for trade facilitation, the ICC claims.
Responding to the Basel Committee on Banking Supervision’s consultative document “Strengthening the Resilience of the Banking System”, the ICC called for the creation of a specialized group to assess the problem. This request echoes the preoccupation expressed in the last ICC Global Survey by private banks´ authorities that the Basel II rules could be thwarting efforts made to recover pre-crisis trade finance levels.
According to the ICC, the accumulated evidence clearly shows shrinkage in the resources available for trade finance due to the current capital adequacy regime under Basel II, which could heavily impact on trade levels and, thus on the possibilities of reaching a full economic recovery within the next year. This is the second time in very few weeks that the ICC has publicly expressed opinions against the Basel II rules. Whether these complaints and the request for the creation of a working group will be heard by the Basel Committee, remains to be seen.