Can Basel III Prevent Future Financial Crisis?

Madzova, Violeta (2012) Can Basel III Prevent Future Financial Crisis? In: Международна научна конференция „Тенденции и предизвикателства в развитието на икономиката”.

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Abstract

The financial sector is crucial for the smooth functioning of the economy. For this reason, the authorities use financial regulation as a means to ensure the stability of the banking system and to correct those ‘market failures’ that would otherwise threaten the solidity of financial institutions. Recently introduced Basel III on the new bank capital and liquidity standards, (that is going to be implemented gradually starting from 2013 till 2019) is changing the way that banks address the management of risk and finance. The new regime seeks much greater integration of the finance and risk management functions. In general , the regulations on capital requirements represent a major step forward in strengthening financial sector stability. However the implementation of Basel III might be followed with certain risks, which might have negative impact on financial stability and progress of the economy. The paper highlights the positive but as well as the negative implications of BASEL III requirements that need to be addressed and analyzed before its practical implementation. The paper refers mostly to the to restrict access to credit, by creating tighter credit conditions for small and medium-sized firms, and for start-up businesses which will directly affect SME development . The tightened criteria for BASEL III might have certain negative impact on economic growth in the medium to long term period. It is also important to mentioned that so called “Shadow banking (such as insurance firms, hedge and pension funds, and investment banks) played a central role in the latest financial crisis and has become a major provider of credit.

Item Type: Conference or Workshop Item (Paper)
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Violeta Madzova
Date Deposited: 12 Dec 2012 14:51
Last Modified: 19 Jun 2013 07:51
URI: http://eprints.ugd.edu.mk/id/eprint/3505

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