Basel III and Banking Efficiency

• The overall aim of the Basel III accord is to minimize and preferably eliminate the risk of a new global financial turmoil in the future. The new accord is particularly emphasising the importance of increasing the capitalization of banks in order to strengthening financial system stability. Basel III requires that banks set aside more ‘core’ equity capital than under the current Basel II accord. Banks are also required to gradually build-up an additional capital conservation buffer of 2.5 percentage units and, if the national regulator so decides, an equally large countercyclical buffer during periods of high credit growth. Besides this, the new accord introduces minimum liquidity requirements both on a monthly and annual basis. In this chapter we study the likely impact of the new regulation on banking operations and efficiency. What is the cost? In the prospect of increased core capital and new liquidity requirements there are already signs of larger Swedish banks reducing their trading operations and widening their interest rate spread differential. Will the new regulation mean a re-shaping of banks and that arbitraging activities move to less regulated parts of the financial industry? What can we learn from structural changes following Basel II when assessing and evaluating the impact of Basel III?

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business (hsv//eng)

Keyword

Ekonomistyrning

Ekonomistyrning

Företagsekonomi

Business administration

Economics

Nationalekonomi

bank regulation

capital adequacy

bank performance

Publication and Content Type

ref (subject category)

kon (subject category)