The Unintended Consequences of the Basel Endgame

Balance Sheet Stress, Bank of England, Basel III EndGame, Bond Markets, FT, LDI, Money Market Fund Reform, PRA, Regulators, Regulatory Reform, Repo, UK Macro, US Treasuries

The vice-chair of Oliver Wyman writes in today’s FT about the unintended consequences of the Basel endgame. The comment period on the proposal ends today. Along with many others, I’ve been posting and advising on the proposal for many months and the article provides a really good summary of why investors and the banking system are right to worry. It calls for a 20-25 percent increase in capital requirements for the largest banks. We have already seen the largest capacity constraint shift from leverage to RWAs in the last few years, and RWA management is already a big focus, but this would indeed be a game changer. Europe and the UK are taking slightly less “belt and braces” approaches, but their own interpretations also call for a material increase. If you’d like to discuss how this will affect you, please get in touch.

https://www.ft.com/content/0e8aaac6-8870-47ce-9562-ef501d59e2ba