Basel Accord Iii

BASEL ACCORD III



Basel III not only improves the solvency of institutions, but also takes further steps to strengthen its liquidity for banks with internationalactivities. These measures are so financial institutions have strength taken to be able to cope with adverse situations to systemic risk, i.e. the risk of changes in thefinancial system that can destabilize the macroeconomy, and thus be able to avoid future world financial crises.

It will increase the quality of bank capitalization in orderto absorb losses casier, thus increasing the minimum percentage of core capital to 4.5% therefore Basel III would contribute to the financial stability but As a result,some banks have already expressed fears that the new capital requirements may trigger a credit crunch in the future. This is a direct result of the new bankingregulations,since it would affect the rising interest rates, taxes and other factors as well as, affecting consumers, workers, entrepreneurs and contributors to the economy.

Moreover,the agreement seeks to reduce procyclicality, i.e., the accumulation of capital in the good times to have in the ups and downs of the financial cycle.
My feeling fowardsthis new agreement are positive because it provides safety and support to the banks and performance standards beneficial to combating financial uncertainty, a long withcontrol to meet its goal of establishing appropriate capital schemes to address the procyclicality of financial systems and systemic risk it will have effective monitoringthat enforce the compliance with the rules all this to achieve stable economies that are able to overcome a crisis without being affected.


Prepared By:

P. Bermudez.