Abstract
This paper focuses on the impact of the Basel III accord on emerging, developing and small economies. It looks primarily at potential unintended consequences of the new rules. The areas of concern for both banks and regulators are found in increases in risk-weighted assets for trading exposures, in capital replenishments in jurisdictions with weaker governance and less developed financial markets, and in coping with enhanced liquidity requirements in multinational groups. The resulting recommendations concern consistent application of rules in various parts of multinational banks and the provision of adequate supervisory powers for adequate control of the institutions and markets.
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Notes
The issues regarding the functioning and regulation of multinational banks are discussed in Calzolari and Loranth (2001). How regulatory intervention depends on the liability structure and insurance arrangements for non-local depositors is investigated in Calzolari and Loranth (2005).
See, for example, Gersl and Seidler (2011). The BCBS itself pointed out that aggregate private sector credit-to-GDP gap might not be a good indicator for all jurisdictions (BCBS, 2010a).
Press release from 10 June 2010 ‘Adjustments to the Basel II market risk framework announced by the Basel Committee’.
The issue of deleveraging is covered, for example, in Aiyar and Jain-Chandra (2012), Feyen et al. (2012) and Herman and Rai (2010).
‘During the financial crisis, however, roughly two-thirds of losses attributed to counterparty credit risk were due to CVA losses and only about one-third were due to actual defaults’, Basel Committee on Banking Supervision, Press release, 1 June 2011.
Such risk has been studied intensively by regulatory authorities in recent years. (See, eg, BCBS, 2013a, 2013b, 2013c; EBA, 2013).
Australia and South Africa have introduced this option.
Covered bonds have been introduced in countries such as Australia, Belgium and Italy, among others.
For example, banks in Malaysia, the Philippines and Saudi Arabia enjoy very high levels of deposits, over 80% of their total funding.
There is some evidence that during the last crisis, parent institutions were not, in a number of cases, a particular source of strength for their affiliates (De Haas and Van Lelyveld, 2014).
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Acknowledgements
The authors would like to thank Rudy Araujo, Pascual O’Dogherty, Karl Cordewener, Ju Quan Tan, Jong Ku Kang, Tae Soo Kang, Samsiah Yunus, Lixing Zhang, Bryan Stirewalt, Michaela Erbenova, Christopher Wilson, Alejandro Lopez Mejia, John Aspden and Jan Kubicek. They note that the paper represents their own views and not necessarily those of the Czech National Bank. All errors and omissions remain entirely the fault of the authors. Part of the research behind this paper was supported by the Grant Agency of the Czech Republic within Project No. 13-08549S. The paper reflects the discussions of the workstream analytical and research group set up by the Basel Consultative Group of the Basel Committee on Banking Supervision.
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Frait, J., TomŠÍk, V. Impact and Implementation Challenges of the Basel Framework for Emerging, Developing and Small Economies. Comp Econ Stud 56, 493–516 (2014). https://doi.org/10.1057/ces.2014.31
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DOI: https://doi.org/10.1057/ces.2014.31