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The Impact of Basel III on Banks’ Capital and the Corporate Treasurer

by Zaid Moola, Director and Head, Corporate Structured Sales, Global Markets, Jan Brits, Director, Capital Management and Alex Davidson, Director, Corporate Structured Sales, Global Markets, Standard Bank Corporate and Investment Banking

Notwithstanding the 2007 financial crisis, the use of over-the-counter (OTC) derivatives both globally and in South Africa has grown exponentially in recent years. The total outstanding notional value of OTC derivatives was US$592tr in December 2008, according to the Bank for International Settlements, of which 70% was for interest rate derivatives. The 2008 post-Lehman collapse has focused attention on counterparty credit and default risks embedded within these derivatives.

Basel III now brings a number of changes to this environment, and one of the most significant is the so-called CVA adjustment.

The use of over-the-counter (OTC) derivatives both globally and in South Africa has grown exponentially in recent years.