From Basel II to Basel III. Would Investment Banking be preferred under Basel II?

Tesis de Máster , 2013 , 48 Páginas , Calificación: 1,7

Economía - Finanzas

In the year 2007 the first bad signs appeared which predicted that something is happening in
global financial markets. An asset-bubble in the US housing market started to bust and that
event had generated fatal consequences not only for the US, but also for the rest of the world.
Several major peaks characterize the recent financial crisis, also named subprime crisis, such
as the country default of Iceland (though subprime crisis was not the main cause) or the
nationalization of the mortgage corporations Freddie Mac and Fannie Mae by the US
government. Certainly, no one forgets the queues of people waiting outside the branches of
the British bank Northern Rock to withdraw their savings from the bank as a result of rumors
about liquidity problems of this institution. Some of the biggest Investment Banks in the
world experienced serious difficulties with reference to their liquidity situation and were
acquired by other banks. JPMorgan Chase bought the traditional US Investment Bank Bear
Stearns and Bank of America merged with the US Investment Bank Merrill Lynch. Clearly,
one of the most important events in the course of the subprime crisis was the collapse of the
US Investment Bank Lehman Brothers which happened on 15th September 2008.
Especially Investment Banks were hit hard by the subprime crisis and also the Investment
Banking divisions of universal banks caused many issues for the whole institution. One of the
main causes of the subprime crisis was identified: the Investment Banking business. The
regulatory framework with reference to the banking supervisory failed in times of financial
turmoil and needed to be reformed. In particular, the capital situation and liquidity profile of
many banks were not adequate compared to the risks these banks were exposed to. Risks
resulting from positions in the trading book (market-to-market) and risks resulting from offbalance
sheet items which were not monitored by supervisory authorities needed to be
emphasized. When the crisis hit, the capital requirements on the banking book were
sufficiently deep to safeguard banks. The capital requirements on the trading book, however,
were nowhere strong enough to absorb the losses (Dayal, 2011, p. 17). The new regulatory
framework, namely Basel III, developed by the Basel Committee on Banking Supervisions
which was finalized in 2011 focused on these risks.

Table of Contents

List of figures

List of tables

List of abbreviations

I. Introduction

II. Theoretical background
II.1. Review of Basel II
II.1.1. Minimum capital requirements
II.2. Review of Basel III
II.2.1. Capital requirements and buffers
II.2.2. Liquidity and funding
II.2.3. Risk coverage
II.3. Research about the impact of capital regulation

III. Impact on Investment Banking activities
III.1. Markets
III.1.1. Commodities
III.1.2. Credit
III.1.3. Equities
III.1.4. Foreign Exchange
III.1.5. Rates
III.1.6. Structured Finance
III.2. Corporate Finance
III.2.1. Mergers and Acquisitions
III.2.2. Equity Capital Markets
III.2.3. Debt Capital Markets

IV. Conclusion

V. Bibliography

• Universidad: Johannes Gutenberg University Mainz
• Calificación: 1,7
• Autor: Malte Vieth (Autor)
• Año de publicación: 2013
• Páginas: 48
• No. de catálogo: V271203
• ISBN (Ebook): 9783656622772
• ISBN (Libro): 9783656622734
• Idioma: Inglés
• Etiqueta: from, basel, would, investment, banking