The Basel Group of central bankers from the main industrial nations - best known for its work in setting international capital standards - is under siege.
Member countries have moved to dilute and delay application of the equity-to-asset ratios. Meanwhile, nonmember developing countries have attacked the rules as crude and discriminatory.
Globally, critics fault the supervisors for years of inaction, followed by preemptive shutdown of the now-notorious Bank of Credit and Commerce International.
The Basel Committee is an informal consultative body with no separate enforcement power. Its mandate and credibility derive from the need to harmonize banking regulation to ensure safety and fairness, and from the voluntary acceptance and relevance of its pronouncements.
Not Up to Full Speed
In the United States, Europe, and Japan, fears of a "credit crunch" have led policymakers to heed bankers' cries for leniency and flexible accounting ing reaching the 8% capital requirement set in 1988.
In Japan, banks stung by the collapse in price of their vast share portfolios - applicable toward the 8% minimum - have petitioned the Ministry of Finance for an extension of the yearend 1992 deadline for implementation.
German banks, their holdings strained from the cost of reabsorbing the eastern half of the country, also demand treatment of their hidden securities reserves as Tier 2 capital.
Liberalization, U.S. Style
American banks have won approval for raising the permitted preferred-stock component of Tier 1 capital as part of a credit-easing package recently announced by President Bush.
The 12 signatories to the historic 1988 agreement intended the capital ratios as a floor for bank credit strength and the foundation of a broader risk framework embracing other financial intermediaries. But since then the central bankers have neglected to reinforce either of these positions.
At the 1991 International Monetary Fund-World Bank annual meeting in Bangkok, the Group of 24 developing nations accused the Basel supervisors of exaggerating credit risk for non-members of the Organization for Economic Cooperation and Development.
Answered in Silence
The Basel representatives at the conference were led by E. Gerald Corrigan, new head of the Committee on Bank Supervision head and president of the Federal Reserve Bank of New York. They did not answer this sweeping indictment.
Mr. Corrigan and his colleagues have also failed to articulate a rationale for incorporating interest rate, foreign exchange, and other critical forms of risk into the technical formulas.
Mr. Corrigan and fellow Basel officials have indicated they will address many of these concerns in coming months, but much of the momentum that accompanied the 1988 accord has already been lost.
At a minimum, the Basel Group's activities should be guided by a small corps of career banking professionals dedicated to sustaining and elaborating the harmonization process. These experts would offer a ready forum for resolving technical and policy questions and could undertake special investigations to prevent future BCCIs.
Need for Professional Forum
The global banking framework is too important not to receive the full-time attention of the international community. Establishing an independent Basel staff capability comprising both developing and developed country nationals would parallel the head-office function existing at most multinational private banks.
Without this deliberate sense of purpose and resolve, the Basel process - which began with such high hopes five years ago - will continue to fade into incoherence and irrelevance.
Mr. Kleiman is president of Kleiman International Consultants Inc., New York.