Basel III cracks are starting to appear is the first part of a two part series that looks at some of the mis-conceptions being bantered around over Basel III.
In this article we argue that Basel III capital floors can't be compared with the Basel II capital approach because the entire capital and liquidity funding methods for banks is going to operate differently under the new regulation.
When I first looked at Basel III quite a few months ago now, I reviewed the accord or back then the proposed guidelines in a positive light. The credit crisis needed a global regulatory response and as heavy handed as it is, Basel III seemed on the surface to address the causal factors for the market collapse of 2008.
There are a lot of fears over Basel III which have been voiced by quite a few risk analysts across the planet. These mostly revolve around the following argument that a strict rule is a linear straight line concept or in the context of Basel III, it will dampen economic growth if the regulation is too severe or will not be effective if the regulation is not strict enough.
This interpretation of the ideal behind Basel III is firstly incorrect and secondly is driving the banking community to act in a discordant manner.
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