Banks are set to face tougher international rules on the capitalthey must have on hand to cope with a change in interest rates,amid regulators' concerns that current standards may be too flimsyto fully capture the risks.

The Basel Committee on Banking Supervision, a group bringingtogether regulators such as the U.S. Federal Reserve and theEuropean Central Bank (ECB), proposed overhauling its current rulesfor interest-rate risk, including possible binding standards on howbanks should measure their resilience to shock rate changes, and onthe capital they should have to cover potential losses.

The work “is particularly important in the light of the currentexceptionally low interest-rate environment in many jurisdictions,”the Basel committee said June 8 in a statement on its website. Thecommittee wants to ensure that “banks have appropriate capital tocover potential losses from exposures to changes in interestrates.”

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