New liquidity requirements demand both stable financing and attractive products
The financial crisis emphasizes the capital and liquidity risks in the financial world. The new Basel III framework was published in December 2010 in order to control these risks better. While Basel II is focused chiefly on counterbalancing losses by capital buffers, Basel III goes a step further. In addition to stricter capital requirements, the new directives of Basel III impose more explicit requirements on the liquidity position of banks. The combination of these requirements in particular makes it more difficult for banks to find the optimum balance sheet ratios.
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.
Corporates set the benchmark for trade finance best practices
As a response to the financial turmoil in 2008 and the subsequent economic downturn we have seen a strong increase in corporate focus for the cash that is ‘caught up’ in the financial supply chain (FSC). Due to limited credit availability in financial markets, companies had to find ‘new’ sources to unlock cash and improve working capital. One of those sources was found within the strategic relationship between buyers and suppliers.
Implications of banking regulation for banks and their corporate clients
The BIS’s new capital requirements for banks, also known as Basel III, draws the attention of various stakeholders. It’s not only the banks that are keen to take note of these additions to the Basel II Accord of June 2006, but their professional clients also want to understand the implications for them. This article provides some suggestions on how to cope with the consequences of Basel III.