AsiaPac banks gear up for Basel III

Standard & Poor’s says most Asian banks won’t find it difficult to comply with Basel III’s new capital requirements.

As banks worldwide gear up for Basel III's new capital requirements in 2013, Asia-Pacific banks look set to undergo a shift in industry dynamics as they adjust their business models in the long run, Standard & Poor's Ratings Services said in a report.

"In our view, Asia-Pacific banks can be classified into three groups: 1) high-growth banking systems such as China, India, Vietnam, and Indonesia that face constant challenges in replenishing capital; 2) low-growth banking systems such as Japan that have been struggling to meet Basel III's target of high-quality capital; and 3) others such as Korea, Singapore, and Australia that will easily meet the capital requirements.

Overall, we believe that most rated Asia-Pacific banks are unlikely to face significant difficulty in complying with Basel III, although some banks with weak capital quality or a high dependence on wholesale funding will find it tougher to adapt to the new global regulatory framework on bank capital adequacy and liquidity."

The Basel Committee on Bank Supervision released its final recommendations for the global regulatory framework in December 2010 and updated them in June 2011. The new capital requirements will be implemented in 2013, and the full implementation of the framework is scheduled in 2019. Basel III is the third edition of the minimum standards applied by regulators to internationally active banks. It is a set of reform measures aimed at increasing the quality of regulatory capital and ensuring global consistency to foster greater resilience among banks to deal with financial and economic stress, improve risk management, and strengthen banks' transparency.