Watering down Basel III's not a sop to the banks

But it is still a hallmark of some worryingly misguided thinking.

The changes to the Basel III international banking regulations have been widely reported as a sop to financiers. But what actually happened?

The Basel regulations are about the stability of the banking system. When the third Basel accord comes into effect this year, it will introduce strict new requirements how leveraged-up banks can be, as well as mandating that they hold enough liquid assets to cover all of their cash outflows for a month. The idea is that by requiring these safety nets, the amount of revenue banks can make is curtailed, but so too is the risk that they will go belly-up in the event of another crisis.

The problem with Basel III is that reducing the amount of leverage a bank is allowed to use is the same as reducing the number of loans it is allowed to make, assuming its available capital stays the same. Reducing the number of loans is sort of what we don't want to happen, what with much of the developed world still being deep in depression and businesses clinging to survival by the skin of their teeth.

In fact, as the NYT's Andrew Ross Sorkin writes, the chances of a leverage induced crisis are quite low.

The change in Basel has been painted, by none-other than Mervyn King, as a trade-off. We thought that the big risk would be another bust; but now we know the big risk is a dead recovery. So lets water down the regulations. King said:

Since we attach great importance to try to make sure that banks can indeed finance a recovery, it does not make sense to impose a requirement on banks that might damage the recovery.

But the problem is, it's not Basel's leverage requirements that have changed. It's the liquidity ones. And they are a lot more important to implement sooner rather than later.

Leverage requirements are important in case we find ourselves in a situation like 2008, where the value of the assets banks are holding drops precipitously. Banks suddenly find themselves much poorer than they thought they were, and a wave of failures sweeps through the system. But we are a long way from the sort of bubble which is required for leverage requirements to be needed. First we need a recovery.

Liquidity requirements, on the other hand, guard against bank runs. And bank runs are a symptom of lack of faith in the system – something which remains very real today. The dilution of Basel now delays the implementation of those requirements, meaning that the risk of bank runs won't be actively fought until 2019; and it also weakens the very requirements themselves, allowing banks to claim a far larger pool of assets as "liquid capital".

Felix Salmon points out that what's really happening is that Basel III has become the latest in unconventional central bank actions:

The committee has clearly determined that if you’ve run out of ammunition in terms of interest rates and quantitative easing, then when you’re searching around for some other monetary-easing tool, regulations are a reasonable place to look. And I really don’t like that precedent. Monetary policy should be entirely separate from bank regulation, even if central banks should properly perform both roles. With the ink barely dry on the Basel III agreement, now is no time to start diluting it for the sake of some hypothetical temporary future marginal boost to growth.

It's important to point out that the actual changes may not be that bad. Alphaville's Lisa Pollack argues that there's a fair amount of whinging which ignores that the weakened regulations are still perfectly perfectly capable of fighting a liquidity crisis. But the principle of the change is still concerning. Regulators decided what would be the best and safest way of running banks, and then changed their mind based, not on new evidence that they could achieve the same safety with less stringent regulations, but on completely different criteria. That bears the hallmarks of the thinking which got us into this problem in the firs place.

A man walks down the banks of the Rhine in Basel, Switzerland. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Labour is a pioneer in fighting sexism. That doesn't mean there's no sexism in Labour

While we campaign against misogyny, we must not fall into the trap of thinking Labour is above it; doing so lets women members down and puts the party in danger of not taking them seriously when they report incidents. 

I’m in the Labour party to fight for equality. I cheered when Labour announced that one of its three Budget tests was ensuring the burden of cuts didn’t fall on women. I celebrated the party’s record of winning rights for women on International Women’s Day. And I marched with Labour women to end male violence against women and girls.

I’m proud of the work we’re doing for women across the country. But, as the Labour party fights for me to feel safer in society, I still feel unsafe in the Labour party.

These problems are not unique to the Labour party; misogyny is everywhere in politics. You just have to look on Twitter to see women MPs – and any woman who speaks out – receiving rape and death threats. Women at political events are subject to threatening behaviour and sexual harassment. Sexism and violence against women at its heart is about power and control. And, as we all know, nowhere is power more highly-prized and sought-after than in politics.

While we campaign against misogyny, we must not fall into the trap of thinking Labour is above it; doing so lets women members down and puts the party in danger of not taking them seriously when they report incidents. 

The House of Commons’ women and equalities committee recently stated that political parties should have robust procedures in place to prevent intimidation, bullying or sexual harassment. The committee looked at this thanks to the work of Gavin Shuker, who has helped in taking up this issue since we first started highlighting it. Labour should follow this advice, put its values into action and change its structures and culture if we are to make our party safe for women.

We need thorough and enforced codes of conduct: online, offline and at all levels of the party, from branches to the parliamentary Labour party. These should be made clear to everyone upon joining, include reminders at the start of meetings and be up in every campaign office in the country.

Too many members – particularly new and young members – say they don’t know how to report incidents or what will happen if they do. This information should be given to all members, made easily available on the website and circulated to all local parties.

Too many people – including MPs and local party leaders – still say they wouldn’t know what to do if a local member told them they had been sexually harassed. All staff members and people in positions of responsibility should be given training, so they can support members and feel comfortable responding to issues.

Having a third party organisation or individual to deal with complaints of this nature would be a huge help too. Their contact details should be easy to find on the website. This organisation should, crucially, be independent of influence from elsewhere in the party. This would allow them to perform their role without political pressures or bias. We need a system that gives members confidence that they will be treated fairly, not one where members are worried about reporting incidents because the man in question holds power, has certain political allies or is a friend or colleague of the person you are supposed to complain to.

Giving this third party the resources and access they need to identify issues within our party and recommend further changes to the NEC would help to begin a continuous process of improving both our structures and culture.

Labour should champion a more open culture, where people feel able to report incidents and don't have to worry about ruining their career or facing political repercussions if they do so. Problems should not be brushed under the carpet. It takes bravery to admit your faults. But, until these problems are faced head-on, they will not go away.

Being the party of equality does not mean Labour is immune to misogyny and sexual harassment, but it does mean it should lead the way on tackling it.

Now is the time for Labour to practice what it preaches and prove it is serious about women’s equality.

Bex Bailey was on Labour’s national executive committee from 2014 to 2016.