Basel III

 

The Basel III Capital Accord introduces expanded quantitative and qualitative capital requirements, new liquidity requirements, a reviewing of the counterparty credit risk and an indebtedness indicator for the banks from the countries members of the Basel Committee. The legal framework underlying the Basel III package that regulates access to this activity, the supervision and the prudential rules applicable to credit institutions and investment firms are implemented gradually starting from 1 January 2014 and until the end of 2018.

The new regulations could bring about the drop in credit institutions’ interest regarding financing, representing a challenge including as regards the capacity of the banking industry to make profits. A challenge is also adapting financial and banking groups to the solvency and liquidity requirements imposed by the Basel III provisions that could lead to the shrinking of exposures and to changing business models. The Romanian Association of Banks took concrete actions before the authorities, including before the European Commission and the European Parliament, in order to protect SMEs’ interests and, actually, the interests of the entire economy. Adapting gradually to the capital requirements does not mean, in a first stage, problems as regards the capitalization need of the Romanian banking sector.

The Romanian banking sector continues to hold consistent capital reserves. The solvency rate continued to be high, i.e. 19,1% in June 2016. Gradually, prudential filters are given up during the implementation of additional capital requirements according to the Basel III Accord (the interval 2014-2018), by 20% yearly. This calculation includes the effects of prudential filters. The solvency ratio calculated if prudential filters are eliminated is by about 4% higher compared to the level reported in conformity with the banking prudential regulations in force, according to the NBR. This fact demonstrates here the adequacy of capital to risks which is better than in many countries of the region. The new liquidity requirements must be reviewed thoroughly in order to avoid any unintentional consequences.

Credit institutions support the inclusion of Legal Reserve Requirements (LRR) in the calculation of liquidity, taking into account the level of the LRR applicable to the liabilities of credit institutions of 8% for lei and of 10% for the foreign currency, compared to the European average of 2%.