Basel III, the international capital and liquidity standards, are set to phase-in starting Jan. 1, 2013, and be completely phased in by 2019. Its impact is going to be felt worldwide. Some countries are better prepared for the adoption than others, but the generous time line is giving every country a chance to meet the various deadlines, in our opinion. The goal of Basel III is to create a level playing field for the world's banks--but that is unlikely to happen. Multiple countries are starting to set standards in excess of Basel III rules, and others think the standards go too far. Accounting differences across GAAP and IFRS make finding a level playing field even more difficult. Additionally, not all of the rules have been written yet. There may be massive changes in the liquidity and stable funding ratios before they are finally implemented. All in all, it is a situation worth watching, because there is a large chance of regulatory arbitrage and we may see some interesting developments in the world's largest banks as a result.
Basel III and Europe
It is little wonder that Europe is the home of the Basel committee--the eurozone has the largest banking franchise in the world. According to the European Bank Federation, European banks provide three fourths of the credit supply in Europe, compared to just one fifth in the US and a little over half in Japan.
Read more on:
-- The UK Banks and Basel
-- Core Europe and Basel
-- Peripheral Europe and Basel
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