The impact of the new Basel Accord on the supply of capital to emerging market economies
by Simon Hayes of Bank of England, and
Abstract: The proposed new Basel Accord aims to ensure that international banks' regulatory capital reflects more closely the credit quality of their loan portfolios. Some commentators are concerned that this might provoke a sharp increase in borrowing costs for debtors domiciled in emerging markets. But the regulatory capital charge will not rise (and may indeed fall) for lending to several emerging markets. And because banks' loan pricing already reflects the borrower's creditworthiness, it seems unlikely that there will be a marked contraction in the supply of loans, even for low credit quality emerging market borrowers.
Keywords: Basel Accord, international banks, policy, capital, market, risk.
Published in: Financial Stability Review, (December 2002), No. 13, pp. 110-114.