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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | The Impact of the Basel III Banking Regulation on different Stakeholder of an Economy |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2020 |
| Abstract Text | This paper is divided into two parts. The first part is a historical review of the work of the Basel Committee on Banking Supervision (BCBS). Since its inception in 1974 the BCBS had the goal to create a multinational banking regulation standard that would level the playing field for international active banks and create stability for the financial sector. Basel I was the first international standard and had as its main component an 8% risk weighted capital requirement. From Basel I to Basel II the risk weight itself stayed at 8% but the calculation of the capital requirements became more complex. Flaws from Basel I in the standardised approach to calculate risk weighted capital were addressed and partially amended. In addition, the internal ratings-based approaches, to calculate risk weighted requirements were introduced. The new methods were criticised as being too optimistic and as a mechanism for large banks to decrease their capital requirements. Studies showed that when using the internal methods capital requirements were significantly lower than with the standardised approach. Basel III was created as an answer to the global financial crisis in 2008. New instruments were introduced to raise the quantity and the quality of banks’ capital. In the 2010s banks had to increase both weighted ratios and leverage ratios to meet the new standards. The second part of the paper discusses the hypothesis that higher capital requirements will lead to a shrinkage of bank lending activity. To address this question, the Swiss and the Norwegian banking sector are analysed. Both the capital ratios and the lending activities during the Basel III implementation are discussed in detail. For the two Swiss global systemically important banks, UBS and Credit Suisse, a stagnation in lending growth from 2015 – 2019 is observed. In the same period the revised “too big to fail” requirements had to be implemented by these banks. With existing work, the empirical connection of capital ratios and bank lending is discussed. |
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