It is too late to start complaining about the Basel III regulations cutting a chunk of their profitability when they come into effect, warns a banking expert.
Dr Lawrence Galitz warned the City in October last year that banks’ profitability would be hit by the new Basel regulations, but said the City failed to listen.
Galitz, who is CEO of ACF Consultants, forecasts a fall in products of a third after Basel III’s introduction in 2013 – a projection formed using ACF software Global Banker.
“Several banks recently complained to regulators about the negative impact Basel III will have on their profits,” he said. “We have been saying this since they were announced six months ago.”
The Basel Committee on Banking Supervision’s third set of rules has tightened the definition of a bank’s Tier 1 capital, which is the amount a bank must hold as a safeguard against future crashes.
“Basel III may force banks to widen their margins and put up the cost of lending and if it’s going to cost banks, it’s going to cost us the consumers, too.”
However, he noted that banks will be safer.
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