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Basel III not seen as good fit for Asia banks 

November 2, 2015

Richard Morrow, Finance Asia

Asia's banks will likely need to raise hundreds of billions of dollars in the coming years to meet new capital requirements that may not fit their circumstances particularly well, a full room of delegates at FinanceAsia's Borrowers & Investors Forum, Southeast Asia, heard on Thursday.

As of this year the Basel Committee of Banking Supervision requires banks to have a minimum core equity tier-1 ratio of 6% of risk-weighted assets plus an additional 2% of tier-2 capital, for a minimum combined ratio of 8%. But by 2019 banks need to raise their tier-1 ratios to at least 8.5%.

Asia's well-capitalised banks generally don't have a problem meeting these Basel III capital adequacy requirements. Many national financial regulators require far higher levels of tier-1 capital than is required currently and lenders typically boast ratios well in excess of what is needed.

However, regional credit growth is set to expand robustly in the years ahead. That promises to make the task of complying with Basel III more challenging. 

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