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The new rule applies from 2018 in Europe and is likely to push down a bank's core capital ratio, a benchmark of financial health that is closely tracked by investors, even though the level of risk remains the same.
The Basel Committee on Banking Supervision said it will retain the current accounting treatment of provisions for an interim period because applying the new rules in full from day one could trigger a "capital shock" for some lenders.
"The committee considers that the period allowed for transition should be no more than five years," it said.
It is the latest sign the Basel committee has become more accommodative in the face of pushback from European and U.S. governments over new capital requirements designed to avoid harming lending by banks.
A core lesson from the 2007-09 financial crisis was that banks were too late in provisioning for defaulting loans, ultimately forcing taxpayers to bail out lenders.
The new rules mean banks must make some provisions upfront, well before a loan is effectively in default under the current system. There will be a similar change in U.S. accounting rules from 2020.
The Basel committee also said it had not yet reached a conclusion on what exactly should be the permanent link between the new accounting rule, which it did not set, and the committee's capital requirements rules for lenders.