The Status of the Basel III Capital Adequacy Accord, Walter W. Eubanks, Specialist in Financial Economics, October 28, 2010
“The new Basel Capital Adequacy Accord (Basel III) is of concern to Congress mainly because it could put U.S. financial institutions at a competitive disadvantage in world financial markets. The Basel capital accord is an agreement among countries central banks and bank supervisory authorities on the amount of capital banks must hold as a cushion against losses and insolvency. Higher capital requirements constrain bank lending and profitability. The accords are not treaties. Member countries may modify the agreement to suite their financial regulatory structures. The concern is that Basel III might be in conflict with the new capital requirements U.S. regulators are implementing under the Dodd-Frank Act (P.L. 111-203). Basel III was the central focus of the discussion at the September 22, 2010, House Committee on Financial Services hearing on international regulatory issues relevant to the implementation of the Dodd-Frank Act. A day after member central bank governors approved the quantitative capital requirements of Basel III, Senate Banking Committee Chairman Christopher Dodd issued a statement warning of the potential for international regulatory arbitrage in implementing Basel III.”
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