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Subjects / Liquidity

Newsletter: December 2010: Study shows Basel III capital impact on loan spreads

Simon Turmaine | December 16, 2010

BASEL – A typical bank could offset a one percentage point hike in its regulatory capital ratio, under the proposed Basel III reforms, by raising its lending spreads by 15 basis points, according to a new study.* This calculation assumes that both the bank’s expected return on equity (ROE) and cost of debt are unchanged, and there is no change in other sources of income, or any reduction in operating expenses.

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