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A cost-benefit analysis of Basel III: some evidence from the UK

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conference contribution
posted on 30.07.2020 by Meilan Yan, Maximilian Hall, Paul Turner
This paper provides a long-term cost–benefit analysis for the United Kingdom of the Basel III capital and liquidity requirements proposed by the Basel Committee on Banking Supervision (BCBS, 2010a). We provide evidence that the Basel III reforms will have a significant net positive long-term effect on the United Kingdom economy. The estimated optimal tangible common equity capital ratio is 10% of risk-weighted assets, which is larger than the Basel III target of 7%. We also estimate the maximum net benefit when banks meet the Basel III long-term liquidity requirements. Our estimated permanent net benefit is larger than the average estimates of the BCBS. This significant marginal benefit suggests that UK banks need to increase their reliance on common equity in their capital base beyond the level required by Basel III as well as boosting customer deposits as a funding source.

History

School

  • Business and Economics

Department

  • Economics
  • Business

Published in

International Review of Financial Analysis

Volume

25

Pages

73 - 82

Source

The European Conference on Banking and the Economy

Publisher

Elsevier BV

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier Inc.

Publisher statement

This paper was accepted for publication in the journal International Review of Financial Analysis and the definitive published version is available at https://doi.org/10.1016/j.irfa.2012.06.009.

Publication date

2012-07-13

Copyright date

2012

ISSN

1057-5219

Language

en

Location

Winchester, UK

Event dates

29th September 2011 - 29th September 2011

Depositor

Dr Meilan Yan. Deposit date: 30 July 2020

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