Basle II prompts strategic rethinks

Extensive revisions to capital requirements under Basle II will force structural changes in the financial services industry, offering advantages to some institutions and hindering others.

THE BASLE II ACCORD is expected to be implemented in 2007 as the basis for global bank regulation, directly affecting the capital required to support an estimated $50 trillion of global credit exposures. Like Basle I in 1988, Basle II will have consequences for a wide range of banking activities, and has already led to extensive political lobbying and pre-emptive strategic positioning.

We estimate that banks will spend around $25 billion (five basis points of assets) preparing for implementation, with the largest banks typically investing $50 million to $200 million over five years.

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