Archivo del January, 2013

Hello Basel III

Few things in finance/economics/society these days are more important than the health of the banking industry.
Nothing is more important for the health of the banking industry than bank capital.
Bank capital is regulated (minimum amount).
The Basel Committee is such regulator.
Basel mandarins have the power to dictate how much capital (how much leverage) banks hold (enjoy).
The 2007-2008 crisis was a crisis of too litte capital-too much leverage.
So-called Basel I-1.5-II failed miserably at calculating and enforcing capital requirements.
As a response to said disaster, Basel III was proposed. In theory, it should lead to more and better capitalized banks. Plus new liquidity requirements, etc.
Basel III just came alive, this week.
But (a very big but) not in the US/EU. At the request of banks (and some politicians/regulators who actually don´t trust that Basel III is stringent enough), the most important financial centers have been allowed to delay implementation of the new rules.
Basel III is alive in India-China-Saudi-Mexico, but not in US/EU.
So the biggest banks effectively continue to abide by the same capital demands in place before (that led to) the cataclysm.
These delays may be “indefinite” (i.e., bye bye Base III).
Should we be concerned, very concerned?

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