Need To Know

Tighter Global Rules For Banks’ Capital

Global financial regulators in Basel, Switzerland, have agreed to compel banks around the world to hold in reserve capital equal to 7 percent of their risk-bearing assets, according to Reuters.

The requirement more than triples the current 2 percent threshold. Among the impacts, many banks will either need to raise additional capital, or cut back on the amount of risk they take — a potential blow to merchant banking and leveraged lending operations.

But to ease the burden on banks and financial markets, regulators gave the banks transition periods to comply with the rules. These periods, extending in some cases to January 2019 or later, are longer than many bankers originally expected.

“The agreements reached today are a fundamental strengthening of global capital standards,” said Jean-Claude Trichet, president of the European Central Bank . “Their contribution to long-term financial stability and growth will be substantial.”

The international agreement could put pressure on banks around the world to reduce merchant banking and other kinds of risk-taking. The Volcker Rule in the United States, part of the Dodd-Frank Act signed into law in July, limits the amount of capital banks here can invest in private equity or hedge funds.

PE Council Expands, Takes New Name

The Private Equity Council, the industry’s lobbying group has attracted 18 new firms to its membership since April, when the organization, facing a legislative onslaught in or regulatory reform in Washington, D.C., opened its doors to all firms doing business in the United States. The additions bring its membership to 30.

New members are: Avista Capital Partners; Brockway Moran & Partners; Crestview Partners; Genstar Capital; Global Environment Fund; GTCR Golder Rauner; Kelso & Co.; KPS Capital Partners; Levine Leichtman Capital Partners; MidOcean Partners; New Mountain Capital; The Riverside Co.; Sterling Partners; Sun Capital Partners; TA Associates; Thomas H. Lee Partners; Vector Capital; and Welsh, Carson, Anderson & Stowe.

And with the broader membership, the organization has taken on a new name: The Private Equity Growth Capital Council.

“Our new members will help us better tell the story of how private equity investment delivers substantial economic benefits to companies of all types and sizes in virtually every state in this country,” said Douglas Lowenstein, the council’s president, in the press release announcing the changes. “And our new name better conveys what private equity is all about: growing companies.”

The council launched in 2006, counting as its initial members Apollo Management, Bain Capital, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co., Madison Dearborn Partners, Providence Equity Partners, Silver Lake, TPG and Thomas H. Lee Partners. Since then, two European firms — Apax Partners and Permira — have joined the organization, and Thomas H. Lee Partners dropped out.