Basel III regulations

Hello everyone,

I just thought after reading though the FT today and reading up on the new suggested implementation of the latest Basel III accords.

The potential cost of capital requirement is undeniable...and the consumer will feel the bite.

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email [email protected] to buy additional rights or use this link to reference the article - www.ft.com... Sir, With all the benefits that Basel III will bring in terms of making the banking industry better capitalised and lowering the risk of another meltdown, it could also bring other unintended consequences (“Basel III break for banks in EU”, May 27). Drastically changing the basic banking business model is one potential outcome. For example, it will virtually eliminate large corporate deposits as part of the capital requirement, since banks will not be able to count these kinds of deposits that usually leave the bank early in the morning and are not available to them. As a result, Basel III has the potential of significantly increasing the cost of capital, forcing banks to find more expensive sources to make up for this. The scale of this is vast – in the hundreds of billions of dollars – and has the potential to compel banks to rethink their pricing models and customer acquisition strategies. No doubt this increase in cost will be passed to customers through new charges. This aspect of Basel III seems to be attacking an area of the bank that performed well during the crisis and does not need much fixing.

Source is here FT basel III

For those who are not familar with the Basel III model here is a brief description:-
Basel III is part of the continuous effort made by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents, and seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. A focus of Basel III is to foster greater resilience at the individual bank level in order to reduce the risk of system wide shocks.

I want to open up the question of how this can be Procyclical as discussed within the FT article. But also introduce this to the ATS community as I feel a large proportion are unaware myself included.

Interesting relevant article to this thread:

Europe Warns US to Speed Up Bank Reform

www.cnbc.com...


As much as I hate bank CEOs collecting exorbitant bonuses, it seems the move toward Basel III regulations is a step toward globalising the economy and banking sector.

Thanks for the link, I cant believe this.

The US has yet fully to implement Basel II. “As you may recall, we implemented Basel II already in 2006,” Mr Barnier wrote. "It is essential to respect the deadlines agreed last year."

US have not even implemented Basel II yet!

7-14% captial

My god ..