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Basel III: Corporates’ Investment Policies – Time to Review?

by Suzanne Janse van Rensburg, Regional Head of Liquidity and Investments, Global Transaction Services EMEA, Bank of America Merrill Lynch

Implementation of the new bank regulation will change the pricing companies can expect on some deposits and could result in changes to, or discontinuation of, some products altogether. Consequently, organisations need to re-examine their investment policies to take account of this new market environment.

The experience of the financial crisis rightly left an indelible mark on the minds of corporate treasurers. Increased counterparty risk led to changes in the banks that companies worked with: security and liquidity became paramount, with yield trailing a distant third as a priority.

Now, however, the liquidity coverage ratio (LCR) under Basel III will prompt companies to reassess their investment policies and how they evaluate risk. While Basel III, which was developed by the Bank of International Settlements in the wake of the financial crisis, primarily targets financial institutions (FIs), it is expected to have far-reaching implications for corporates.