Home > Uncategorized > The bankers finally admit that Basel III will result in higher interest rates

The bankers finally admit that Basel III will result in higher interest rates

After all the happy talk that Basel III is no big deal, word is leaking out from the bankers that the cost of capital will inevitably rise.

It’s amazing to see each mainstream newspaper in each country basically arguing that banks in other countries may have to change their practices in order to comply with Basel III, but the domestic banks are fine.  This is the line taken in the US, the UK, Australia, France… in fact in every Western country.  Even German banks are saying their bond issues are simply giving them the capacity to expand rather than to prepare for Basel III.

They can’t all be right.  And access to the internet makes transparent how ridiculous these obviously inconsistent claims really are.

The truth is gradually leaking out.  Angela Knight, chief executive of the British Bankers’ Association, let slip the following:

“The transition is the critical bit as the rules take money out of the economy. Even though the UK banks are in a much stronger place than most on capital, the Basel changes need to be implemented over a long timetable and very carefully sequenced to avoid prolonging the downturn.”

However, she warned: “The consequence is that invariably the cost of credit – the price the borrower pays for money – will rise. The era of cheap money is over.”

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