Financial Regulations in the Process of Global Financial Crisis and Macroeconomics Impact of Basel III

Basel III (or the Third Basel Accord) is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision in 2010-2011, and scheduled to be introduced from 2013 until 2018. Basel III is a comprehensive set of reform measures. These measures aim to; (1) improve the banking sector-s ability to absorb shocks arising from financial and economic stress, whatever the source, (2) improve risk management and governance, (3) strengthen banks- transparency and disclosures. Similarly the reform target; (1) bank level or micro-prudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress. (2) Macro-prudential regulations, system wide risk that can build up across the banking sector as well as the pro-cyclical implication of these risks over time. These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk system wide shocks. Macroeconomic impact of Basel III; OECD estimates that the medium-term impact of Basel III implementation on GDP growth is in the range -0,05 percent to -0,15 percent per year. On the other hand economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in banking funding costs, due to higher capital requirements, to their customers. Consequently the estimated effects on GDP growth assume no active response from monetary policy. Basel III impact on economic output could be offset by a reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points. The aim of this paper is to create a framework based on the recent regulations in order to prevent financial crises. Thus the need to overcome the global financial crisis will contribute to financial crises that may occur in the future periods. In the first part of the paper, the effects of the global crisis on the banking system examine the concept of financial regulations. In the second part; especially in the financial regulations and Basel III are analyzed. The last section in this paper explored the possible consequences of the macroeconomic impacts of Basel III.

Authors:

• M. Okan Tasar

Keywords:

• Banking Systems
• Basel III
• Financial regulation
• Global Financial Crisis.

References:

[1] U─ƒur Emek, "Devletin Kapasitesi ve ─Éktisadi Kalk─▒nma S├╝recindeki
─Éslevi", Ba─ƒ─▒ms─▒z D├╝zenleyici ve Denetleyici Kurumlar ve T├╝rkiye
Uygulaması, TÜSĐAD Yayın No:T/2002-12/349, Aralık 2002, s. 58.
[2] M. Okan Tasar, Piyasa Ekonomilerinde 3R:Rekabet,Reg├╝lasyon ve
Reform, Konya:Sayram Yay─▒nlar─▒, Yay─▒n No:28, 2008, s. 86 ve M. Okan
Tasar, "Finansal Reg├╝lasyonlar ve K├╝resel Kriz S├╝recinde T├╝rk D├╝nyas─▒
Bankac─▒l─▒k Sistemlerinin Yeniden Yap─▒land─▒r─▒lmas─▒", T─ÉKA Avrasya
Et├╝dleri Y─▒l:15, Say─▒:36, 2009, ss.7-46.
[3] Markus M. M├╝ller, "Reconstructing The New Regulatory State in
Germany: Telecommunication, Broadcasting and Banking", German
Politics, Vol:10, No:3, December 2001, s. 53-55.
[4] BDDK, Finansal Piyasalar Raporu, Aral─▒k 2008, s. 17.
[5] Ralf Babenroth, Diema Dietrich, Uwe Vollmer, "Bank Regulation and
Supervision in Bank-Dominated Financial Systems: A Comparison
Between Japan and Germany", European Journal of Law and
Economics, Vol:27, No:2, April 2009, s. 178.
[6] Lili Xie, "Universal Banking, Conflicts of Interest and Firm Growth",
Journal of Financial Services Research, Vol:32, No:3, December2007, s.
197.
[7] Jill M. Hendrickson, Mark W. Nichols, "How Does Regulation Effect
The Risk Taking of Banks", Journal of Comparative Policy Analysis,
Vol:3, No:1, June 2001, s. 79.
[8] Tim B├╝the, "Politics and Institutions in The Regulation of Global
Capital: A Review Article", The Review of International Organisations,
Vol:3, No:2, June 2008, s. 211-217.
[9] Edward J. Kane, "Architecture of Supra-Govermental International
Financial Regulations", Journal of Financial Services Research, Vol:18,
No:2-3, December 2000, s. 305.
[10] Eric S. Rosengren, "Modernizing Financial Regulation: Implications for
Bank Supervision", Journal of Financial Services Research, Vol:17,
No:1, 2000, s. 117.
[11] David T. Llewellyn, "Financial Regulation: A Perspective from United
Kingdom", Journal of Financial Services Research, Vol:17, No:1, 2000,
s. 313.
[12] Raghuram Rajan, "Cycle-proof Regulation", The Economist, April 11th
2009, s. 71.
[13] Rajan, p. 71.
[14] C. Murat Baykal, "Hukuki Boyutlar─▒yla Finansal Krizler", Bankac─▒lar
Dergisi, Say─▒:60, Mart 2007, s. 47.
[15] Kane, p. 302.
[16] Kane, p. 303.
[17] Xavier Vives, "Restructuring Financial Regulation in The European
Monetary Union", Journal of Financial Services Research, Vol:19, No:1,
February 2001, s. 58-65.
[18] Llewelly, p. 312.
[19] Vives, p. 77.
[20] Llewellyn, p. 312.
[21] Babenroth, Dietrich, Vollmer, a.g.m., s. 177.
[22] Mehmet G├╝nal, "T├╝rkiye-de Bankac─▒l─▒k: Sorunlar, Gelismeler, ├çöz├╝m
Önerileri", Ahmet Ay (ed), Türkiye Ekonomisi, Konya: Çizgi Kitabevi,
2007, s. 333.
[23] G├╝nal, s. 335.
[24] Rosengren, p. 118.
[25] K. Batu Tunay, Mustafa T. Uzuner, "Kamu Bankalar─▒n─▒n T├╝rk
Bankac─▒l─▒k Sektör├╝ndeki Yeri ve Etkileri", Vildan Serin (ed), ─Éktisat
Politikas─▒, ─Éstanbul: Alfa Yay─▒nlar─▒, 1998, s. 263.
[26] Tunay, Uzuner, s. 261.
[27] Tunay, Uzuner, s. 265.
[28] C.A.E. Goodhart, "The Background to The 2007 Financial Crisis",
International Economics and Economic Policy, Vol:4, No:4, February
2008, s. 332.
[29] Goodhart, p. 336.
[30] Vives, p. 58-60.
[31] Paul Krugman, Bunal─▒m Ekonomisinin Geri Dön├╝s├╝, ├çev: Nesenur
Domaniç, Đstanbul: Literatür Yayınları, 3.B., 2003, s. 100.
[32] Seyfettin Ünal, Sezgin Açıkalın, "2001 Krizinin Kamu ve Özel
Bankalar─▒n Performans─▒na Etkileri", 12. Ulusal Finans Sempozyumu
Bildiriler Kitab─▒, Kayseri 22-25 Ekim 2008, s. 20.
[33] Ünal, Açıkalın, s. 20.
[34] Pelin Ataman Erdönmez, "K├╝resel Kriz ve ├£lkeler Taraf─▒ndan Al─▒nan
Önlemler Kronolojisi", Bankacılar Dergisi, Sayı:68, Mart 2009, s. 85.
[35] Neslihan Topbas, "Finansal Kriz Ortam─▒nda Bankalar─▒n Muhasebe
Sistemlerinde Ger├ºe─ƒe Uygun De─ƒerleme Yönteminin Etkileri",
Bankac─▒lar Dergisi, Say─▒:68, Mart 2009, s. 56.
[36] Rajan, p. 71.
[37] Erdönmez, s. 86.
[38] Erdönmez, s. 89.
[39] Mark J. Flannery, "Modernizing Financial Regulation: The Relation
Between Interbank Transaction and Supervisory Reform", Journal of
Financial Services Research, Vol:17, No:1, 2000, s. 111.
[40] U─ƒur Emek, "Finansal Piyasalarda Serbestlesmenin ─Éktisadi B├╝y├╝me
Üzerindeki Etkileri", Rekabet Dergisi, Cilt:1, Sayı:3, 2000, s. 80.
[41] M├╝n├╝r Yayla, Yasemin T├╝rker Kaya, "Basel II, Ekonomik Yans─▒malar─▒
ve Geçis Süreci", BDDK, Arastırma Dairesi Çalısma Raporları: 2005/3,
May─▒s 2005, s.3, www.bddk.org.tr
[42] M├╝n├╝r Yayla, Yasemin T├╝rker Kaya, s.3.
[43] ─Éhsan U─ƒur Delikanl─▒, "Road to Basel III Strategies and Priorities of The
BDDK", www.bddk.org.tr
[44] Moody-s Analytics, "Basel III New Capital and Liquidity Standarts-
FAQs", www.moodysanalytics.com,
[45] Eymen G├╝rel, Esra Burcu Bulgurcu G├╝rel, Neslihan Demir, "Basel III
Kriterleri", Bankac─▒l─▒k ve Sigortac─▒l─▒k Arast─▒rmalar─▒ Dergisi BSAD, Cilt:
1, Say─▒: 3-4, Ocak 2012, ss. 16-28.
[46] Scott Roger and Francis Vitek, "The Global Macroeconomic Cost of
Raising Bank Capital Adequacy Requirements", IMF Working Paper
12/44, February 2012, p.3.
[47] Patrick Slovik and Boris Cournede, "Macroeconomic Impact of Basel
III", OECD Economics Department Working Papers No: 844, 14 Feb.
2011, p.6., www.oecd.org/eco/Workingpaper
[48] Slovik and Cournede, p. 13.
[49] Slovik and Cournede, p. 11.
[50] P. Angelini and the others, "Basel III: Long-term impact on economic
performance and fluctations", BIS Working Paper No:338, February
2011, p.16.
[51] Slovik and Cournede, p. 13.
[52] Roger and Vitek, p.4
[53] BDDK, Risk Yönetimi ─Édaresi, "Sorularla Basel III", Aral─▒k 2010.
[54] ─Éhsan U─ƒur Delikanl─▒, "Road to Basel III Strategies and Priorities of The
BDDK", www.bddk.org.tr