A cost-benefit analysis of Basel III Some evidence from the UK (1).pdf (323.1 kB)
A cost-benefit analysis of Basel III: some evidence from the UK
conference contribution
posted on 2020-07-30, 13:27 authored by Meilan YanMeilan Yan, Maximilian Hall, Paul TurnerThis 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 AnalysisVolume
25Pages
73 - 82Source
The European Conference on Banking and the EconomyPublisher
Elsevier BVVersion
- 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
2012-07-13Copyright date
2012ISSN
1057-5219Publisher version
Language
- en