From London in 2012 to Basel in 2013

by Helen Sanders, Editor

As I write this the day before the Opening Ceremony for the Olympic Games, it is hard to believe the transformation that has occurred in east London and in the venues around the UK in only seven years since London was awarded the Games. The banking sector is engaging in a similar transformation. Over the next five years, the regulatory and market environment for banks, and the institutional customers with whom they work, will become barely recognisable compared with the conditions that existed before the 2008-9 crisis. Many have argued that this is either a good or bad thing respectively, but change is inevitable and inexorable.

One of the most substantial new regulations is known as Basel III (or the Third Accord of the Basel Committee of Banking Supervision) which will have far-reaching implications for banks and their customers. Although Basel III is mentioned a great deal, primarily in the context that ‘things will change’, what this means in practice is less clear. This problem is exacerbated in that the details of Basel III have yet to be determined. However, with new capital adequacy requirements rolling out from January 2013 (with a deadline of 2019 that seems long but is unlikely to prove to be) Basel III is now an immediate consideration for banks and their customers.

Key elements of Basel III

The requirements of Basel III cover capital requirements, leverage ratios liquidity and systemic risk issues, but for the purposes of this article, we will focus on capital requirements and in particular, liquidity, which will have the greatest impact on the way that banks engage with their corporate customers. As Greg Kavanaugh, Managing Director, Head of Global Liquidity and North America Product Solutions, Bank of America Merrill Lynch summarises,

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