TOPIC: Basel III brought about changes to commercial bank operations and activities. Three key changes were:
(i) capital requirements;
(ii) leverage ratio; and
(iii) liquidity rules. Critically discuss the potential impact these changes will have for the banking sector.
Suggested starting points for references:
1. McKinsey and Co. (2010). Basel III and European banking: Its impact, how banks might respond, and the challenges of implementation.
2. KPMG (2011). Basel III: Issues and implications.
Introduction:
What was the rationale for Basel III?
Here, students are expected to briefly discuss the rationale for Basel III (i.e., reaction from the GFC), followed thereafter by a discussion of the main differences between Basel III and its predecessor, Basel II.
Literature Review/Critical Analysis:
What are the potential economic impacts of the reforms to commercial banks?
This is the key to this assignment topic. The focus should be on the three factors outlined in the essay question above. Students are expected to discuss, where applicable, the short-term and long-term impacts revolving around potential changes to retail banking activities, risk appetite, cost of funding, balance-sheet restructuring, etc.
1500 words
5 Harvard references.