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Basel III: Highlights and Potential Responses by Corporates

The Bank for International Settlements’ (BIS) capital requirements for banks, also known as Basel III, impact on a wide variety of stakeholders.  It's not only the banks that are keen to take note of the additions to the Basel II Accord, but their corporate clients also want to understand the implications. This article examines the various effects on corporates and their treasury departments, and also provides some suggestions on how to cope with the consequences of the Basel III capital adequacy regime.

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New terms for a marriage of convenience

Impact of Basel III on corporate banking relationship

While Basel III may restore the health of the financial markets and the banking industry in the long run, it will also have an impact on the real economy and business in the mean time. The economic impact of Basel III is often mentioned, but seldom analyzed in detail. This article assesses the potential impact of Basel III on companies and outlines some options that corporate treasurers and bankers can explore in order to minimize the effects.

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Challenges to the recapitalization of European banks

Implications for high risk/high yield banking activities

The requirements to be introduced by Basel III will lead to higher capital ratios and adequate liquidity resources. They will make it necessary to adopt new strategies and innovative solutions to optimize balance sheets and sustain the profitability of banks. As such, banks will be forced to reconsider their product offerings and funding strategies pushed by the policymakers’ urge to a recapitalization of the banking sector.

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Will Basel III force disintermediation?

Implications for high risk/high yield banking activities

The new capital requirements specified by the Bank of International Settlements (BIS), also known as Basel III, have landed broadly. A great deal of attention has been focused on the implications of Basel III for the capital structure of banks. Various banks have since adjusted their capital positions to match the new preconditions. A number have even gone as far as acquiring new (hybrid) capital via so-called contingent convertibles (coco) in anticipation of the stricter requirements, allowing capital to behave like debt, except in certain (stress) situations in which it is converted to Tier 1 capital. Basel III, however also has implications for the other side of the balance sheet. This article aims to provide insight into the implications for the high risk/high yield activities of banks in Europe.

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