Basel III

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Additional Capital Requirements


Phase In Schedule

I've been looking at the Basel III international banking proposals, and I find them rather weak tea.

The 10¢ tour of the proposal is that they are requiring more capital, 4.5% tier 1 capital (basically capital that can be redeemed for cash in a market essentially immediately), a further capital conservation buffer, and a "counter-cyclical" buffer that would kick in when times are good.

This will all be phased in over a 5 year period starting in 2013.

As to what it all means, I agree with Yves Smith that, "the reality is that a Basel III world will not look hugely different to the one from which the last crisis sprang."

In particular, there is next to nothing on synchronizing accounting standards, which will send banks to places where they can call a bouquet of flowers a Tier 1 asset, does not deal with the shadow banking system in any meaningful way, and ignores the vast pit of putrescence that is the ratings agencies.