Global regulators beefed up rules for tackling interest-raterisk in banks' loan books, but stopped short of imposingbinding capital requirements after fierce opposition from thefinancial industry.

The Basel Committee on Banking Supervision said the risk posedby changes in interest rates is “material,” especially at a timewhen rates “may normalize from historically low levels.” Theupdated rules published on Thursday pertain to customer loans andother assets that lenders expect to hold for long periods, or tomaturity, and whose current value can vary when rates change.

Banks pilloried a proposal last year to replace the existingsupervisor-led approach with minimum capital requirements setcentrally by the Basel Committee, whose members include the U.S.Federal Reserve and the European Central Bank. The regulator “notedthe industry's feedback,” and concluded that the “heterogeneousnature” of interest-rate risk in the banking book was “moreappropriately captured” by bolstering the current system.

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