The world took a significant step toward averting future financial meltdowns Thursday, just as the United States under President Trump begins relaxing constraints on risky behavior by banks.
A group of global central bank governors and bank regulators, meeting in Frankfurt, signed off on the last chapter of a banking rule book they began writing after the financial crisis began in 2008. The rules are intended to prevent the kind of mischief by banks that triggered the last meltdown, causing millions of people to lose their homes and jobs.
The rules are the capstone of years of grindingly detailed work by the so-called Basel Committee. Known as Basel III, the rules require banks to reduce their dependence on borrowed money so they are less susceptible to losses from bad loans, market turmoil or other problems.
“It’s a great day,” Mario Draghi, the president of the European Central Bank, said at a news conference.
But he acknowledged that the agreement was not perfect.
“This is a compromise,” Mr. Draghi said. The rules will make the banking system more resilient, he added, but “nothing is crisis proof.”
The negotiators were unable, for example, to reach agreement on a way to address one of the root causes of the government debt crisis that nearly destroyed the eurozone a few years ago.
And agreement on the new rules is just an interim step. The countries that took part in the negotiations pledged to incorporate the rules into national legislation. Some, including the European Union, have a spotty record of doing so. In any case, the latest rules would not take effect until 2022.
“We will be in better shape when this is implemented,” said Stefan Ingves, who is chairman of the Basel Committee on Banking Supervision and governor of Sveriges Riksbank, the Swedish central bank. “At the same time,” he said, “it’s impossible to know what’s in store for the future.”
The rules were hashed out by the Group of Central Bank Governors and Heads of Supervision, which comprises representatives from 26 countries, including the United States, plus the European Union and Hong Kong. The United States agreed to the most recent set of rules despite the Trump administration’s push to roll back bank regulations.
After the 2008 crisis, the United States was ahead of Europe in forcing banks to improve their ability to absorb losses. United States banks may benefit because their European competitors will now be compelled to adhere to higher standards.
“It doesn’t make a big difference for U.S. banks,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “It makes a big difference for some European banks.” He said, for example, that the rules would require European banks that specialized in mortgage lending to hold more capital.
Mr. Véron said the agreement “shows that there is a piece of international regulatory cooperation that makes progress under Trump.”
“The global infrastructure for addressing common problems is not completely broken,” he added.
Steven Mnuchin, the United States Treasury secretary, said in a statement Thursday that the rules “will help level the playing field for U.S. firms and businesses operating internationally.”
One of the main lessons of the last financial crisis was that many banks that appeared healthy on paper were acutely vulnerable to disruptions in the flow of money among financial institutions. That was what happened in the atmosphere of fear and mistrust that prevailed after the collapse of the Lehman Brothers investment bank in September 2008.
Banks stopped lending to one another, the international financial system seized up, and many lenders quickly ran dangerously low on cash, requiring taxpayer bailouts to survive.
The Basel III rules require banks to hold more capital — another way of saying that they must rely less on borrowed money, so that they can absorb losses without collapsing. The regulations also require banks to show they have enough liquid assets to survive a cash crunch.
Most of those rules were negotiated years ago, and many have already gone into force.
The last chapter in the negotiations, which concluded Thursday, revolved around the way that banks calculate the risks of different kinds of business. The riskier an asset, the more capital a bank is required to hold.
The previous rules gave banks substantial discretion to determine, for example, how risky a commercial real estate loan, home mortgage or business loan might be and how much capital would be required. The compromise approved Thursday sets limits on banks’ leeway without entirely eliminating it.
But the negotiators were unable to agree on rules that would have reduced banks’ vulnerability to their holdings of government bonds, a cause of the eurozone debt crisis.
Many banks in countries like Greece, Spain and Italy hold large portfolios of their own government’s debt. In 2010, severe declines in the value of Greek, Italian, Spanish and Portuguese government bonds threatened those countries’ banks, creating a so-called doom loop.
Wounded by the bond losses, the banks stopped lending to consumers and businesses. The economy tanked, government tax receipts plunged, and the government got into even more trouble.
But most of the countries represented in the negotiations opposed rules that would have discouraged banks from investing in government debt and would have made it harder to finance public borrowing.
“At this juncture, it was not possible to get to a consensus on this particular issue,” Mr. Ingves said. “Things stay the way they are.”