A shallow analysis of basel iii implications and response measures
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Contents
Toc\o "1-9"\zhyperlInk\l " toc256 million" directory 1
HyperlInk\l' toc2560001' text 2
HyperlInk\l "toc 25600002"
HyperlInk\l " toc25600003" keyword: basel iii; new agreements; impact; commercial banks 2
HyperlInk\l " toc2560004" , introduction 2
HyperlInk\l " toc25600005" ii. Key elements and framework of basel iii 3
HyperlInk\l " toc25600006" (i) key elements of basel iii 3
HyperlInk\l' toc25600007'1. Capital ratio, level i
HyperlInk\l" toc25600008"2 capital retention buffer 3
HyperlInk\l " toc25600009" 3. Countercyclical buffer 3
HyperlInk\l' toc256000010'4. Liquidity ratio 4
HyperlInk\l' toc256000011'5. Leverage requirement 4
HyperlInk\l " toc256000012" (ii) timeline for the implementation of key basel iii rules 4
HyperlInk\l ' toc256000013'
HyperlInk\l " toc256000014" (i) possible impact of basel iii on international banking 5
HyperlInk\l " toc256000015" (ii) impact of the new agreement on us banking 5
HyperlInk\l " toc25600016" (iii) impact of basel iii on european banking 5
HyperlInk\l " toc256000017" (iv) impact of basel iii on china's banking sector 6
HyperlInk\l " toc256000018" iv. Reasonable response to basel iii 6
HyperlInk\l " toc256000019" (i) continue to follow developments and prepare to adjust response measures
HyperlInk\l " toc256000020" (ii) appropriate development of intermediate operations to change the broad-based profit model based on credit spreads
HyperlInk\l " toc256000021" (iii) rational evaluation of basel iii and development of regulatory standards appropriate to our national context
HyperlInk\l " toc256000022" v, conclusion 7
HyperlInk\l " toc256000023" reference 7
HyperlInk\l " toc256000024" paper original statement ( template) 8
HyperlInk\l " toc256000025" paper thanks (template) 9
Text
A shallow analysis of basel iii implications and response measures
Yeah
Summary: based on a brief description of the main elements and framework of basel iii, a focused analysis of the impact of basel iii on banking at the global level and in the world's major countries and regions, and a final proposal for a rational response to basel iii
Keywords: basel iii; new agreements; implications; commercial banks
Introduction
The 2008 subprime crisis had hit the global economy hard. On the one hand, national financial regulators have begun to reflect deeply on the causes of the crisis and on gaps in the regulatory system. On the other hand, basel ii, with its three pillars of adequate capital, supervision and inspection, and market discipline, began to be questioned. Basel iii had emerged in the search for a more stable financial market system. So, what are the regulatory standards and content different from the previous basel iii comparison? What has been the impact on banking worldwide? What should we do about the new deal
Ii. Key elements and framework of basel iii
(i) key elements of basel iii
Primary capital ratio
Basel iii provides that, as of january 2015, the lower capital adequacy rate at the level of global commercial banks will be increased from the current level of 4 per cent to 6 per cent, and the “core” level of capital, consisting of common equity, will increase from the current level of 2 per cent to per cent of bank-risk assets. The greatest impact of the new agreement was the significant increase in the demand for capital adequacy at the bank level。
2. Capital retention buffer
Unlike the old basel agreements and the new basel agreements, basel iii introduced a capital retention buffer of % to ensure that banks maintain an appropriate capital buffer to “absorption” losses in times of economic crisis. The more capital adequacy is lower than regulatory capital requirements, the more restrictive it is. If banks have a capital adequacy rate below regulatory capital requirements, they are subject to restrictions in terms of stock buy-backs, dividends payments and bonuses。
3. Countercyclical buffers
In order to achieve a broader macroprudential goal, the capital requirement for a counter-cyclical buffer is set at 0 per cent per cent, which, like a capital retention buffer, is supplemented in the form of an ordinary equity, mainly to avoid the impact of excessive credit expansion on systemic risks。
4. Liquidity ratio
The liquidity coverage ratio (lcr) should be greater than or equal to 100 per cent in the short term (30 days) in response to short-term liquidity shocks. The net stable capital ratio (nsfr) is a medium- to long-term target that should be greater than or equal to 100 per cent and is designed to encourage banks to adopt stable financing strategies。
5. Leveraging requirements
The basel committee has reached a consensus on the criteria for regulating leverage: the indicator will be tested for validity from 2013 on the basis of a 3 per cent standard and will enter the transition period for the indicator from 2013 to 2018; and the leverage indicator will be formally included in the framework of pillar i of the basel agreement from 2018。
(ii) timetable for implementation of key basel iii rules
Basel iii provides that, starting in 2013, member states must transform the agreement into legislation and regulations within a specified time frame and will implement it in phases over a series of different transition periods, to be implemented no later than 1 january 2019。
Specifically, the minimum general equity capital will be raised to % from 2015, the lowest level of capital to %, and the capital retention buffer to % from 2016 to 2019. At the same time, the mobility regulatory indicator, the liquidity coverage ratio (lcr), will introduce the minimum regulatory standard in 2015, and the net stable financial ratio (nsfr) will introduce the minimum regulatory standard in 2018. The leverage ratio will be tested at 3 per cent from 2013 to 2017。
Iii. The impact of basel iii on banking at the global and world levels
(i) possible impact of basel iii on international banking
After the adoption of basel iii in 2010, there was a divergence of views on its impact on the banking sector. The view was expressed that the global banking sector, particularly in europe, would face significant financial pressures and that, in order to meet the target, the banking sector would finance hundreds of billions of dollars through different sources of financing. Because standards are too stringent, they may inhibit the availability of capital for economic growth. The new capital structure will also affect business and business models in the financial sector. In addition, international regulatory arbitrage is likely to result from inconsistent regulatory efforts across countries. However, the view was also expressed that, in the long term, if the new agreement could stand the test of a market economy, it would certainly provide a solid foundation for economic stability and long-term growth。
(ii) impact of the new agreement on united states banking
According to the 2010 annual commercial bank report, the top 10 commercial banks in the united states have an average capital adequacy rate of %. The impact of the new agreement on the banking sector in the united states has been modest, as major commercial banks have met the targets set in basel iii。
(iii) impact of basel iii on european banking
The implementation of the new agreement is facing serious difficulties in europe: on the one hand, promoting economic growth after the crisis is the biggest problem facing europe’s banking sector, and, on the other hand, the new agreement, because of its original intent to guarantee the stability of the financial system, will inevitably discourage some financial activity. The excessive demands of the new agreement in europe would thus harm the financial sector and the economy as a whole, thereby impeding the recovery of european economies。
(iv) impact of basel iii on banking in china
At present, chinese financial markets are still underdeveloped and innovation of financial instruments has been lacking, leaving the chinese banking sector less affected and little to lose during the 2008 crisis. In the short term, this new basel agreement has had little impact on the banking sector in china and commercial banks will continue to operate steadily。
In the long run, however, our credit has grown rapidly in a macroeconomic context dominated by indirect financing. However, too fast an increase in credit will inevitably affect the capital replenishment of banks, which, given the stringent requirements of the new agreement for capital replenishment, will inevitably become a major obstacle to the development of bank risk management。
Iv. Reasonable responses to basel iii
(i) continued follow-up to developments and preparedness to adjust response measures
As basel iii is currently in the exploratory phase of implementation in our country, its regulatory standards and the requirements for indicators do not necessarily correspond to the actual performance of our banking sector, and our regulatory authorities ' requirements for indicators are still under discussion, so we should keep an eye on the regulatory authorities ' relevant provisions on indicators, etc., and actively respond to them。
(ii) appropriate development of intermediate operations to change the broad-based profit model based on credit spreads
For commercial banks, meeting the capital adequacy requirement will necessitate an increase in bank reserves to address potential risks. This, of course, will limit the size of credit funds and is a significant constraint on the profitability of banks. Commercial banks should therefore make every effort to choose a profit model with a small capital occupancy. Some of the intermediate operations, however, have a small expenditure of funds, which, while ensuring profitability, can be scaled up and the use of funds more efficiently。
(iii) sound evaluation of basel iii and development of regulatory standards appropriate to our national circumstances
Basel iii, the regulatory rule, is not static. In each country, there will be specific regulatory rules tailored to each country's circumstances. With regard to the new agreement, we cannot be blind, we cannot copy and copy, but we need to set specific rules that are appropriate to the healthy development of our financial system, in accordance with our national circumstances。
Conclusion
There is no doubt that basel iii represents a significant breakthrough from the previous agreement. The increases in the first-level and “core”-level capital ratios have increased the regulation of commercial bank reserves; the introduction of capital retention buffers to ensure that “losses” can be absorbed in times of economic downturns; counter-cyclical buffers affect systemic risk in order to avoid excessive credit expansion; and liquidity ratios have increased the stability of the financial system. Basel iii, though it has had little impact on countries such as china and the united states, where indicators are already in place. But in europe, as the effects of the financial crisis have not disappeared, there is now considerable pressure on the european banking sector to meet the standards in the short term. With regard to the new agreement, we should keep abreast of its dynamic changes and make reasonable adjustments; furthermore, the business model can be adjusted appropriately to develop intermediate operations; and, with regard to the basel agreement, our financial system will operate smoothly by establishing rules that are appropriate to our national context, without copying them or blindly。
