The world's top central bankers and regulators said Monday they had reached broad agreement on new standards to make sure the banking system could face any new financial crisis with confidence. “The agreements reached today are a landmark achievement to strengthen banking sector resilience in a manner that reflects the key lessons of the crisis,” European Central Bank president Jean-Claude Trichet said. Officials “have ensured that the reforms are rigorous and promote the long term stability of the banking system,” he said in a statement. “We will put in place transition arrangements that ensure the banking sector is able to support the economic recovery.” Trichet's was commenting on the Group of Governors and Heads of Supervision which oversees the work of the Basel Committee on Banking Supervision, tasked with drawing up a new regulatory framework for the banking industry. Nout Wellink, who heads the Basel committee and the Dutch central bank, said “a strong banking sector is a necessary condition for sustainable economic growth.” Monday's agreement should provide additional transparency on the planned reforms, thereby reducing market uncertainty, Wellink added. The Basel Committee's new rules - dubbed ‘Basel III' - will update previous regulatory accords in the fallout from the global financial crisis which sank many banks and plunged the global economy into recession. Its recommendations will be submitted to a summit of the Group of 20 top economies later this year for approval. The reforms and changes mainly cover capital and liquidity, and debt and provisioning rules to ensure that the commercial banks retain enough reserves to get them through any fresh crisis without the need to be bailed out. Rescue packages in many countries in the past two years have cost hundreds of billion of dollars and strained to breaking points many governments' finances. The announcement follows stress tests whose results on Friday showed that the European banking system was largely sound and strong enough to survive another crisis.
