There is a simpler solution. Require each bank on an on-going basis to disclose its current asset, liabilities and off-balance sheet exposure details. Market participants will calculate each bank's capital ratios instead in a highly consistent manner.
Global regulators must step up supervision of how so-called Basel III bank standards are implemented in order to ensure a level playing field among lenders, the head of Canada's banking watchdog said on Wednesday.
Julie Dickson, who heads the Office of the Superintendent of Financial Institutions (OSFI), said the regulator has been emphasizing internationally that capital rules must be accompanied by "intensive supervision" to be effective and that there was an effort underway to increase scrutiny.
"It's been agreed that we're going to try to assess whether global banks, if given the same portfolio, would come up with the same capital," she told the Senate Standing Committee on Banking, Trade and Commerce.
"That's going to be very difficult to do, but it's on the radar screen and a huge amount of effort will go into that in the coming months."
Dickson said she has told Canadian banks that they should be prepared to meet the new standards, which toughen rules on how much capital and liquidity they must hold, by the first quarter of 2013 rather than 2019 as laid out by the agreement.
"Canadian banks are currently well-positioned to meet or exceed this expectation," she said.
But she acknowledged that there were questions as to whether or how quickly some other countries would implement the rules, due the weak economic outlook in Europe and the United States.
She said that was why Basel III has a very long transition period, but she added: "We're very, very focused on this. We want other countries to implement because that's how you get a level playing field."
The spreading European sovereign debt crisis has wrought havoc with the region's banks, and Dickson noted that markets were concerned that Europe's plan for a 106 billion euro ($141 billion) recapitalization of its banks may not be enough.
"The market is speaking to some extent, so there are some concerns about the European banking system," she told reporters after her testimony.
"The IMF had talked about to 200 to 300 billion euros, and I think the market is wondering whether (106 billion) is sufficient," said Dickson, who chairs a supervisory committee on the G20's Financial Stability Board.
Dickson said she had not done the work herself to determine the European plan's sufficiency, but added: "At the end of the day, it's the market opinion that matters."So, let's end the regulators' monopoly on all the useful, relevant information and require banks to provide ultra transparency. The market can use this data to make a fully informed opinion.