The committee had already agreed to a soft phase-in for its net stable funding ratio, which covers a bank's longer-term liquidity. That measure will be tested from 2012 and become mandatory in January 2018.

On Tuesday the committee said it would also have a softer phase-in for its liquidity coverage ratio (LCR), which will require a bank to hold enough highly liquid assets, mainly government bonds, to cover 30 days of net cash outflows.

The LCR observation period will start next year but the committee still wants the rule to become a minimum global standard in January 2015.

Its current manifestation is faintly ridiculous: Lenders can't say for sure who holds a mortgage—which means that sales can't go through. Buyers won't put down good money for a property if they aren't sure they'll get clear title to it, nor will lenders extend loans. Buyers of hundreds of billions of dollars' worth of mortgage-backed securities may have grounds to sue.

So much has been said about the recent problem with US mortgage foreclosure documentation. It would be interesting to find out if any other markets had developed mechanism similar to MERS and how do they operationalize it. It seems ridiculous to me to shred the original paper documents after digitization.

With an international dataset of credit default spreads as a credit risk measure, we propose a novel empirical framework to identify the structure of credit risk network across major financial institutions around the recent 2007-2008 global credit crisis. The findings directly shed light on credit risk transmission in a financial network and help find systemically important financial institutions from the perspective of interconnectedness. Specifically, Lehman Brothers, Morgan Stanley, Safeco, Chubb, and possibly AIG in the US and BNP Paribs, Dresdner bank, and UBS in the Europe are primary senders of credit risk information. Goldman Sachs, Bear Sterns, Bank of America, and Metlife in the US and Barclays, RBS, Commerzbank, and HVB in the Europe play the role of the exchange center on the credit market by intensively receiving from some financial institutions and then transferring credit risk information to others. Finally, Citigroup, Wachovia, JPMorgan and Hartford in the US, and ABN AMRO, ING, Rabobank, and Deutsche Bank in the Europe appear to be prime receivers of credit risk information.

An attempt in the right direction. (data driven) However, it is the national regulators who will implement the add-on for systemically significant banks, and I still has doubt if they will be willing to base that add-on on international interconnectedness.

One unintended consequence of the current round of reform could come to the banks’ rescue. Banks have long argued against punitive capital requirements on the basis that they will restrict their ability to lend.

One likely, but little discussed, consequence of higher capital requirements is that companies will turn to the capital markets for their financing needs. In other words, the reforms will disintermediate lending banks. Investment banks that can help clients raise money on the capital markets should benefit.

We have seen this before. After the banking crises of the 1980s and early 1990s, the markets saw an explosion in new forms of capital raising as banks in the US, Europe and Japan were forced to rein in their lending. This is reflected in data kindly crunched for Financial News by Citigroup: bond issuance overtook net loan issuance in the second half of 1990 and has never looked back.

Former Societe Generale trader Jerome Kerviel is facing three years in jail after being convicted by a Paris court.

Kerviel was told he must also repay the damages of 4.9bn euros ($7bn; £4bn) which the bank said it lost through his risky trades.

He was found guilty of forgery, unauthorised computer use and breach of trust.

According to the plaintiff lawyer, SocGen is not planning to make Jerome Kerviel replay the damages, which is only sensible. The amount (4.9 Billion Euro) will wipe out the net worth of the 106th wealthiest person on earth, going by the 2010 Forbe's list. The damage being awarded is more symbolic and clear SocGen from class action lawsuit, since the statement clearly state it is a solo act, and the bank is not in the know until a few days before the story broke. (I find that hard to believe)

The Swiss, fearing their economy could collapse under the failure of one of their large banks, have roughly doubled up capital requirements for UBS and Credit Suisse, asking each bank to hold some 75 billion Swiss francs in capital, in common equity and new financial instruments called contingent convertible bonds. Read our coverage here.

The strict rules, known as “Swiss finish” to the new Basel III banking rules, are, however, less stringent than many investors and analysts had feared, because the amount of common equity to be held by the two banks is only slightly higher than prescribed under the international rules.

Instead of holding 7% in common equity against risk-weighted assets, UBS and Credit Suisse will have to own 10% of common equity, something which both banks are expected to attain shortly after the new measures are expected to come into effect in 2013.

Tougher rules for bigger banks: Here's the start.