lts important
to highlight
that something
fundamental
has changed 9
Marco Roddenhof:
Marco Roddenhof
Basel III - December 2009
Basel III -July 2010
122%
97%
100%
Mortgage Bank
Commercial Bank
Consumer Bank
In December 2009,
the Basel Committee
developed proposals
to harmonisethe
liquidity supervision of
banks internationally.
Known as Basel III, the
proposals are expected
to be ratified by G20
finance ministers in
November of this year.
Implementation of the
liquidity requirements is
scheduled for late 2012.
The graph shows the
required amount of stable
funding, and highlights
the changes made to
the proposals between
December 2009 and
July 2010.
the crisis we had banks in trouble in the United Kingdom
and the Netherlands with a run off rate of more than
5 percent over a matter of weeks, which led to bankruptcy or
government take over. So the question is, 'can Basel III lower
the risk of such events taking place in the future?' I believe
it can. Firstly, the liquidity buffer will not only give banks the
chance to mitigate the initial impact of a financial crisis, it will
give the regulators a bit of time to step in and come up with a
solution. And secondly, if all banking institutions in the market
are required to keep such a buffer, but an incident hits only
a handful of banks hard, then the others still have sufficiënt
funds to take care of the problem and remain liquid."
Emmen echoes De Roo's view that the primary lesson to be
learnt from the financial crisis is risk reduction. He explains
that the Basel II regulations, which were published in 2004,
upgraded risk management across a number of critical areas
the sector and, perhaps more importantiy, among the general
public, De Roo says. Yet he's also careful to point out that the
Basel III proposals are based on models, such as the 'stress tests'
designed to gauge banks' financial health, and as such don't
always match real-world situations. "What we saw during
the crisis was how quickly a bank can lose the support of its
customers. The current Basel III requirements state that for
retail and small and medium sized enterprise (SME) deposits,
the run off rate floors have to be 5 percent for stable funds and
10 percent for less stable funds. Now, of course, this is a model
that looks at the banking sector in its entirety. Yet during
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