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The Next Perfect Banking Storm 

March 29, 2016

Christopher Langner, Bloomberg Gadfly

Those looking for when the next financial crisis might be should set a reminder for Jan. 1, 2018.That's when a host of new rules are scheduled to come into force that are likely to further constrain lending ability and prompt banks to only advance money to the best borrowers, which could accelerate bankruptcies worldwide. As with any financial regulation, however, the effects will start to be felt sooner than the implementation date.

Two key rules are slated for 2018: The leverage ratio set by the Basel Committee on Banking Supervision and International Financial Reporting Standard No. 9, defined by the International Accounting Standards Board. Other rules that require banks to stop using their own internal measures to assess risk start to be introduced from next year.Basel III has already been blamed for reduced liquidity in global markets and slower credit growth. What's about to be rolled out will be a steroid shot to that.

As regulation has increased, the number of credit-related jobs at financial institutions has plunged.

IFRS 9, for instance, will require earlier recognition of expected credit losses, a move that according to some credit analysts could increase nonperforming assets at some banks by as much as a third. As bad loans -- or their recognition, for that matter -- increase, so do capital requirements. In other words, it'll be more expensive and difficult for banks to lend. Read more

 
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