[Critical Review of Basel III: An Evaluation of New Banking Regulations]

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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EXECUTIVE SUMMARY

The Basel III agreement increases capital requirements and suggests the implementation of capital and liquidity buffers to protect banks against risk while leaving the problem of the source and the propagation of systemic risk in the system aside. Banks will be better individually protected against expected risk while systemic risk will develop in the economy. This development could lead to unexpected losses for which capital and liquidity buffers and requirements could be too low. Indeed, the process of securitisation and risk transfer towards the shadow or parallel banking system weakens the sustainability of the entire financial system. In this respect, the agreement provides answer for the protection of individual banks while leaving aside the issue of the propagation of systemic risk in the financial industry.

Table of Contents

ACKNOWLEDGEMENT2

DECLARATION3

EXECUTIVE SUMMARY4

CHAPTER I: INTRODUCTION1

Introduction1

Rationale of the Study2

Aims & Objectives of the Study3

CHAPTER II: CASE BRIEF1

Introduction1

Basel III and other proposals for reform of bank regulation3

How relevant are the Basel III capital requirements for Africa?4

Basel III liquidity requirements9

Macroprudential Policy Measures10

CHAPTER III: PROBLEM STATEMENT AND PLAN OF ANALYSIS1

Problem Statement1

Plan of Analysis3

CHAPTER IV: ANALYSIS & FINDINGS1

Capital1

Increase the quality, consistency and transparency of the capital base1

Improvement of the coverage1

Introduction of a debt limit (leverage ratio)2

Reduction of procyclicality and strengthening of counter-cyclical buffers2

Systemic risks and mutual relationships3

Liquidity4

liquidity coverage ratio4

Net Stable Funding Ratio5

Transition Phase5

Financial Crisis6

Basel III is not yet completed9

Conversion in the setting10

SWOT analysis:11

CHAPTER V: PROPOSED SOLUTION TO PROBLEM1

REFERENCES1

CHAPTER I: INTRODUCTION

Introduction

In assessing the impact of the implementation of the Basel III agreement on the economic process, one must critically wonder which problem this accord should aim to tackle. Most of the analyses of the preceding accord emphasised the procyclical character of the agreement. The global financial crisis has spurred an urgent review of bank regulatory frameworks to enhance the resilience of financial systems and institutions. It revealed the strong inter-linkages between the financial systems of the developed countries and those in emerging and developing markets and exposed the weaknesses of existing prudential regulations in safeguarding systemic financial stability. As a result, reforms are necessary to rectify flaws in the current regulatory framework. The Basel Committee on Banking Supervision (BCBS) is leading efforts to reform the global regulatory framework. In December 2010, BCBS announced proposals that have been dubbed Basel III, which national regulators and regional supervisory organizations are reviewing to evaluate their suitability to conditions in their own financial systems.

Key lessons from the global financial crisis revolve around leverage, capital and liquidity. Many banks entered the crisis with too much leverage, too ...