Treasury Risk Management in the New Era of Regulated Capital
Impacts of Basel III on Capital Requirements
Basel III will mandate banks to shore up capital to meet tighter requirements, either by raising more capital or rationalizing their lending portfolios. For banks, this will mean a reshuffling of their corporate client bases to whom they lend, and changes to product lines. For corporations, this will lead to transformed banking relationships and possibly a reshuffling of funding sources.
Corporations currently measure risk and report on derivative holdings to meet financial reporting requirements. Some also analyze their exposures and risk positions for strategic process. However, the rising tide of new regulations will give way to a new and more fundamental purpose than the reporting currently focused on financials. Corporate risk disclosures and portfolio valuations will become germane not only to compliance, but to securing funding. Clarify of risk disclosures and portfolio valuations will become the price of admission.
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