New Basel III Rules Turn The Screws On Top Banks

screw screwed crank

Photo: Wikimedia Commons

New details are starting to emerge about Basel III, and the final numbers banks will have to abide by after the rules go into full effect.According to Reuters (via Felix Salmon):

  • A 6% Tier I capital requirement (up from 4%)
  • An additional 3% anti-cyclical buffer in Tier I capital
  • Core tier I capital with 2.5% made up of the conservation buffer and anti cyclical buffer

Felix Salmon has a pretty complete diagnosis of the numbers:

As a result, a healthy bank wanting to pay dividends in a growing economy will need total capital, including Tier 2, of 16%. That’s a reassuringly large number.

The banks are going to scream bloody murder about these numbers, I’m sure, and start waxing apocalyptic about reduced credit availability and lower economic growth and quite possibly plagues of locusts as well.

Notably, these requirements are not going to take effect until 2014. Bank shares moved lower today, though that might be because of the continuing troubles in Europe and the shakeup at Barclays and HSBC.

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