How Will the Impending Basel III Regulatory Reform Impact the UK Investment Banking Sector's Current Focus On Operational Efficiency in Securities Financing

By

ACKNOWLEDGEMENT

The completion of this dissertation would have been impossible without the supervision of certain individuals, I am grateful to all those who have helped throughout by providing their support and help.

I am indebted to my professor to provide me with thorough understanding of the matter under study and to the participants of the study for their co-operation in filling the questionnaire and making the analysis possible.

Lastly I would like to show my gratitude to my colleagues who also assisted me willingly in completing this dissertation.

DECLARATION

I am obliged to the regulations of the university related to plagiarism and ensure that the work included in this dissertation is my own and does not contain any copied work from other sources.



ABSTRACT

The global financial crisis has resulted in creating significant impact on the governance of banks. It imposed various challenges on the global banking sector and their liquidity position; therefore, it resulted in the need for developing reforms that will enable banks to be governed in an effective manner and overcome the unexpected risks and uncertainties. However, these regulations will impose greater implications on the financial institutions, making it even more complex to follow the regulations. Although, it has become challenging for financial institutions to comply with the reforms of Basel III, but it has also provided them with various opportunities to achieve operational efficiency. Thus, it is important for banks to follow the regulations for better governance; moreover, simultaneously they should also adopt strategies that will enable them to overcome the challenges that have been imposed by these complex reforms. In order to overcome the unexpected risks in the banking sector Basel III framework has provided complete guideline for managing the leverage that banks can provide their clients and the liquidity they must maintain. Thus, the researcher has focused on gaining an insight on the Basel III regulatory framework and determining the impact it creates on the UK banking sector in ensuring operational efficiency in securities financing.

ACKNOWLEDGEMENT2

DECLARATION3

ABSTRACT4

CHAPTER 1: INTRODUCTION7

1.1 Background7

1.2 Problem Statement8

1.3 Research Question9

1.4 Research Aim9

1.5 Research Objectives10

1.6 Significance of the Study11

CHAPTER 2: LITERATURE REVIEW13

2.1 Development of Basel Regulatory Framework14

2.2 Defining Basel II15

2.3 The Origins of Basel III16

2.4 Major Introductions of Basel III18

2.4.1 Capital Increase18

2.4.2 Capital Conservation Buffer18

2.4.3 Countercyclical Buffer18

2.4.4 Leverage Ratio18

2.4.5 Liquidity19

2.5 Challenges Imposed by Basel III Reforms21

2.6 Understanding Securities Financing in Banks23

2.7 Impact of Basel III Regulatory Framework on Securities Financing25

2.6 UK Banking Sector and Implementation of Basel III Regulatory Framework27

CHAPTER 3: RESEARCH METHODOLOGY29

3.1 Secondary Research29

3.2 Primary Research31

3.2.1 Interviews31

3.2.2 Field Research Instrument32

3.3 Sample Size33

3.4 Qualitative v/s Quantitative Data34

3.5 Research Validity and Reliability36

3.5.1 Eliminating the Error38

3.6 Research Ethics38

CHAPTER 4: DATA ANALYSIS40

CHAPTER 5: DISCUSSION56

5.1 New Liquidity Rules of Basel Committee56

5.2 Amendments in the assumptions of the rules57

5.3 Understanding of Basel III57

5.4 Operational Efficiency in Basel III58

5.5 The Global Financial Crisis and the Liquidity position of the Banks58

5.6 The Reason behind Banks' ...