Basel III regulations will shake up credit markets, hike interest rates globally
Thursday, October 20, 2011 at 10:23AM If international banking regulations don’t interest you, you’re missing the boat on matters that can have a direct impact on your personal finances, starting with access to credit.
Basel III regulations set to kick in during 2013 will likely result in higher interest rates on mortgages, and the regs will likely result in tighter credit for corporations around the globe.
Basel III is a continuance of regulations set by the Basel Committee on Banking Supervision, ostensibly to enhance both risk management and transparency.
Lender Newscast pointed to a report issued by the Federal Housing Finance Agency. FHFA said Basel III increases capital requirements for big banks.
The new requirements come in the aftermath of a global financial meltdown that found many banks short on capital and long on debt as well as risk.
LN also said Standard and Poors’ forecast a possible rationing of credit for corporate entities around the world.
Christopher Whalen, a journalist and analyst in the finance sector, called Basel III a “statist, anti-democratic construction.” Whalen, said LN, believes Basel III will actually increase systemic risks.
Gretchen Morgenson, in her best-selling book Reckless Endangerment, goes into great detail about the role of the Basel Committee in the global financial meltdown. While many Americans rightfully look to elected officials like former Sen. Chris Dodd (D-Conn.) as actors in the meltdown, there is good reason to point to Basel members who saw opportunity for profits in instruments that carried great risk.
Morgenson explains how capital requirements were watered down in the mid-1990s by the ten countries comprising the Basel Committee. Central bankers from each country determined standards for bank oversight.
During that time, globalist enthusiast President Bill Clinton was pushing his Affordable Homes agenda in the U.S.
The Federal Reserve also played a key role, said Morgan, “allowing a debt instrument to be counted toward the least risky calculation of capital…” That resulted in a bank’s ability “to make their financial statements appear sounder than they were.” [pg. 112]
The greatest benefits were realized by large global banks.
Membership on the Basel Committee has grown to more than 2 dozen countries including the U.S., China, Turkey, Mexico, Russia, France and Germany.
Homeowners seeking to refinance or companies seeking credit should bear the impact of Basel III in mind and act before 2013. The regulations will impact anyone seeking credit around the globe.
Whalen wrote,
“In good times, Basel III was an enabler for bad banking practices and excessive leverage. Now we are seeing the very same global bureaucrats who fomented the financial bubble rush around setting new, incomprehensible rules that we call Basel III.”
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(Analysis by Kay B. Day/Oct. 20, 2011)