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FT.com / Comment / Opinion - Basel III is bad news for emerging economies
... as Basel III staggers towards the finishing line at November's Group of 20 leading economies meeting in Seoul, it has become clear that the needs of emerging markets have been ignored. 2004's Basel II proved fiendishly difficult to apply in conditions where even large corporations lack credit ratings; where the data to build credit scoring systems barely exists; and where there are few institutional investors who might actually read public disclosures. Far from fixing this, Basel III makes it even worse.
Basel III poses two fundamental challenges for emerging markets. The first concerns deadlines. After the banking industry stoked fears that Basel III's requirement to raise more capital could choke off nascent economic recovery, an Augustinian compromise was reached... As a result, implementation is now stretched until the end of this decade.

Yet emerging markets need to operate on a different timetable... However, Basel III's transition period means that no emerging economy is likely to want to be the first mover. Bankers in developing countries will argue with some justification that they should not be disadvantaged relative to competitors in advanced economies.

The second challenge is whether it makes sense for emerging market banks to be more highly capitalised and liquid than those in wealthier countries... But, as the tier 1 ratio rises, should emerging economies ratchet up their own requirements just to maintain an emerging market premium?

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Oct 15th, 2010 at 03:29:22 AM EST
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Big Banks May Escape Capital Surcharge as Global Talks Founder - Bloomberg
Leaders of the world's largest economies, divided over how to curb risk-taking by their biggest banks, will likely fail to agree on a capital surcharge.

Instead, the Financial Stability Board, which is weighing measures to prevent such institutions from causing another economic crisis, will recommend a range of options without setting a level of extra capital to be imposed globally, said members of the group who declined to be identified because the discussions are private. The FSB will meet in Seoul next week.

The fissures running through the group are similar to those that split the Basel Committee on Banking Supervision when it considered tighter capital requirements for all banks this year. Germany, France and Japan are resisting a surcharge for big lenders, as are lobbyists for those firms, while the U.K., U.S. and Switzerland advocate the approach, members say. That camp agreed to soften some of the Basel capital rules with the understanding that more would be done to restrain the largest banks through the FSB.

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Oct 15th, 2010 at 04:10:40 AM EST
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