Austria on Monday became the first country in the eurozone, and one of only a handful across the globe, to say it would fast track compliance with the Basel III capital rules.
With a eurozone recession imminent and Austrian lenders exposed to woes further east, it appears odd to heap pressure on banks to comply with rules six years ahead of their rivals elsewhere.
To boot, Austria will also introduce an additional capital buffer early. And the buffer will be set between 2-3 per cent dependent on the risks inherent in banks’ business models, higher than the 1-2.5 per cent specified in the Basel III framework.
Is Austria getting too tough too soon? Read more
It looks like Congress will not heed pleas from the Federal Reserve for a fiscal policy plan – see Bill Dudley’s speech last Thursday for another example – as we await confirmation that the ‘supercommittee’ has failed. This is very bad news for the coherence of US economic policy, something totally ignored by Congress, which seems to think it can have an extended philosophical argument about the correct size of government without any consequences.
As Mr Dudley noted (emphasis added):
“It would be greatly beneficial if the Administration and Congress could more effectively work together to craft a coherent fiscal policy. As I see it, this would consist of two elements—continued near-term fiscal support to underpin economic activity and long-term fiscal consolidation to ensure debt sustainability. Without action in Washington, fiscal policy will turn sharply restrictive in 2012—exerting a direct drag on real GDP growth of more than one percentage point. At the same time, the long-term path under current policy is unsustainable.”