The Impact Of Basel Iii Regulations On Banking Practices: An Examination Of Loan Volume And Interest Rates
Dr. Andreas Papadopoulos
University of Thessaloniki, Department of Economics, Thessaloniki, Greece
Professor Eleni Ioannou
University of Thessaloniki, Department of Economics, Thessaloniki, Greece
Abstract
In the aftermath of the 2008 financial crisis, a pressing need for financial sector regulation and supervision reform became evident. This reform effort was initiated by the G20, with key organizations like the Financial Stability Board and the Basel Committee on Banking Supervision (BCBS) taking the lead. Their goal was to enact a comprehensive agenda of regulatory changes to enhance the resilience of the banking sector, enabling it to better withstand financial and economic stressors while minimizing adverse effects on the real economy.
These reform measures, introduced over a two-year period starting in 2009, comprised several critical components. The initial installment, known as Basel II, included strengthening trading book capital requirements, imposing higher capital requirements for re-securitization products held in both the banking and trading books, and providing enhanced guidance on Pillar II, which focuses on the supervisory review process. Subsequently, in late 2010, the BCBS released Basel III, outlining further reforms. These measures aimed at refining regulatory capital definitions, introducing a leverage ratio as a risk-based capital requirement safeguard, establishing capital buffers, enhancing risk coverage by improving the methodology for measuring counterparty credit risk, and implementing rigorous liquidity measurement standards.
These regulatory reforms mark significant progress in bolstering the financial sector's resilience and risk management capabilities. This study delves into their implications, effectiveness, and broader impacts on the global financial landscape.