The Impact of Basel III on Export Finance
April 8, 2015 - Fremont CA USCompliance4all
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Overview: New regulations are going to dramatically increase banking charges and exporters are going to be impacted more than most. Coming on the heels of the banking crisis of 2008, Basel III is the latest attempt at creating a global set of regulations that assure the ability of banks to sustain credit losses in a financial downturn. At a fundamental level, the regulations increase the amount of capital banks are required to maintain while also requiring banks to properly evaluate customer risk and allocate capital accordingly. As a consequence, banks are pushed to charge more in general and to charge even more for high-risk transactions. Unfortunately for exporters, the regulations do not adequately capture the low-risk nature of trade finance. The larger the bank and the more internationally active, the greater the impact. For a smaller bank, the proposed regulations may require almost 10 times as much capital to confirm a letter of credit, while, for the largest banks, the capital requirement may be a whopping 72 times as much. The costs of export financing will also increase significantly. In this session, the presenter will explore the new regulations and explain the manner in which they are to be phased in and applied to banks of different sizes. Participants will learn what to expect in terms of increased costs and what to do in order to to minimize such costs.