India’s banks already satisfy a core Tire I 8% criteria so a move on to a Tier I 9% criteria which RBI proposes would be an easy task and not need INR 1.5 T of cash as ET and some experts have suggested. It also means however that India will again choose to face BIS with “Country specific requirements” to completely do away with complicated RA considerations. Apparently Goldman Sachs agrees that India’s banks do not need much to get to the Basel III requirement too. However in defense of those who cooked up requirements a typical global bank would get charged 1.5-2% of its Asset book when it moves to the new Basel III RWA regime, sometimes even more.
That means that Basel 2 and Basel 2.5 ratios for banks have to be far more than 10% for them to consider being safe for Basel 3 even after inter bank capital is cancelled . That at once identifies the different challenge for global banks who have been surviving on 20-30% components of Capital coming from other bank issues , each scratching the other’s back and that it fortunately is not a systemic problem in India where inter bank exposures are far more limited and measured against specific deals
- Basel III rules may cost local banks money – ANZ (radionz.co.nz)
- RBI adopts Basel III Capital Regulations (pxvlaw.wordpress.com)
- Singapore Banks Unaffected by Stricter Capital Requirement Norms (prweb.com)
- Basel III misses opportunity to break down the silo culture in banking – Algorithmics questions the missing link between capital and liquidity (prweb.com)
- Why European Bank Buffers May Not Be Quite What They Seem (dealbook.nytimes.com)