Basel III
In what sense will the new capital requirements of Basel III affect retail banking?
After almost four years of turmoil in the financial markets finally an inclusive reform of banking regulation is now arriving in Europe. There are many observers not only within but outside the market as well that believe that these new rules are coming at a perfect time as the industry is already facing another crisis. The regulation need to keep pace with the problems in the industry. However, right now it does seem like this might be a once-in-a-generation chance to put the industry on a regulatory foundation that is firm so that the industry could be restored and enabled to play its vital role in the financial system (Blundell-Wignall, 2011).
In these new regulations the capital-markets businesses come in to get the most crucial treatment. There are many universal banks that have focused their investments as well as their time on dealing with the effects that these new regulations have on the businesses (Blundell-Wignall and Atkinson, 2008).
Less attention has been received by the retail banking. Apparently the impact that the regulations have had on the retail banks seem to be moderate. Basel II and Basel III have dramatically increased the risk weightings for wholesale- banking products in some of the cases while in other cases the risk weights for the retail products are largely unaffected. The retail-banking capital needs are affected by the Basel III most of the times through the higher capital ratios that all the businesses have been affected with. Retail banking at first, even appears to be the recipient of the funding rules according to Basel III, the reason behind this is the fact that the retail deposits are of critical nature for the future funding of universal banks (Blundell-Wignall and Atkinson, 2010).
Looking a little closely, one can clearly see that the European retail banking will be challenged in a severe manner. Firstly, the impact that Basel III had on retail banking is less than the one that it had on the wholesale banking but it is not small nonetheless.
Secondly, there are numerous other regulatory...
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