Bloomberg View: Bumbling From Basel, Again

Not for the first time, the Basel Committee on Banking Supervision has retreated from its mission to build a safer global financial system. Its final liquidity rule is far less rigorous than the committee had said it wanted and financial markets had been expecting. This is a shame, though it’s not the biggest mistake the committee has made. The failure to set effective capital-adequacy ratios is a greater cause for concern. The liquidity rule announced on Jan. 6 merely confirms the main point: The Basel project is failing.

The committee issued its draft liquidity rules in 2010. The idea was to lay down the quantity and quality of liquid assets (in theory, assets that can be sold quickly without driving down prices) that banks must hold to cover a run on deposits or some other interruption in short-term funding. Under pressure from banks, especially those in the U.S., most aspects of the draft proposal have been weakened in the final document.