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Regulators ease rule curbing banks' exposures to customers

Published on Apr 15, 2014 9:12 PM

LONDON (REUTERS) - Global regulators have eased a new rule limiting how much business a bank can undertake with a single customer, as they try to minimise the risk of fallout from a counterparty going bust without imposing excessive burdens on financial firms.

Regulators want to avoid the damage to financial stability an insolvency can wreak, as seen with the collapse of US bank Lehman Brothers in 2008 which led to taxpayers bailing out several lenders.

"In cases where the bank's counterparty is another bank, large exposure limits will directly contribute towards the reduction of system-wide contagion risk," the Basel Committee of banking regulators said in a statement on Tuesday.

The committee, made up of banking supervisors from nearly 30 countries, published the final version of a new rule that will take effect in 2019, bumping up compliance costs for banks and potentially limiting how much business they can conduct with a customer.

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