Reference no: EM132961102

The Basel Committee on Banking Supervision (BCBS) has agreed to a schedule for Basel III that involves gradual implementation over the next decade. The Australian Prudential Regulation Authority (APRA) has reaffirmed its expectation that ADIs will comply more quickly with the required capital ratios and expects that compliance will be achieved by January 2020. This reflects a general perception that transitioning to Basel III will be relatively smooth in Australia. This may not be the experience in other parts of the world. In May 2018, the president of the association of German public banks stated in an annual press conference that the impact of the Basel III reforms on the calculation of capital ratios will be to drag the German system back to 2015 levels. He also adds that the regulatory efforts will prove to be in vain, like an act of Sisyphus who pushes a boulder up the mountain, only to see it roll down again.

• In May 2018, The Financial Times reported that the CFO of Commerzbank of Germany, in talking about Basel III, suggested that 'the devil is in the detail' and that the rule changes are difficult to quantify. French lender Société Générale says it can assess the impact of some but not all of the new rules while Dutch bank ABN Amro states that its capital requirements might jump by more than one-third due to changes in definitions and measurement methodology as well as stricter requirements.
• Changes to the methodology applied to risk measurement and the acceptability of various assets that can be used to meet capital requirements have real impacts on financial institutions. In some countries, the adjustment process to Basel III may be tumultuous

Problem 1: Outline the positives for the Australian banking system in light of the Basel III reforms.

Problem 2: Describe the concerns regarding Basel III from the perspective of the German banking system.

Problem 3: What is the role of APRA in guiding the implementation of the Basel III reforms?