BASEL III Amateur hour -- Conception of what a reserve is, is flawed

- restricts potentials and economic opportunity, when lending limited- restricts small nations and creates a dependence of foreign lending to supply domestic credit markets (even in an even flow, periods of one way flow, creates concessions, that indebt small nations' banks [Association of Federal Reserves long term balancing act to restrict this effect.]- prohibits lending, loans are future deposits that create reserves, need new loans to build reserves, therefore Basel III places the cart before the horse- reserves in stocks and bonds fluxucate, therefore reserve percentage artificialhttp://federalreservesassociation.blogspot.comAdvice to nations around the planet, and their Banks is to reject BASEL III~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~http://www.torontosun.com/money/2010/04/08/13514061.htmlThe bank of clearance aggregate cannot express itself in M1. BASEL III intended purpose, is to try and make banks have a percentage of assets in M1, yet the size of the reserve and total bank assets is based on M3.Monetary science details: how a nation's amount of paper currency, is small in size, compared to the capital lending market's size, and how that w. And as such, designing a banking regulator system, that banks have paper reserve percentage's is flawed. BASEL III will actually damage the World Financial Markets, as restricts the world economy, as the world economy is based on M3 bank of clearance lending credits.http://www.mi2g.com/cgi/mi2g/frameset.php?pageid=http%3A//www.mi2g.com/cgi/mi2g/press/250110.phpQuote, "Under proposals from the Basel Committee -– which have been dubbed 'Basel III' –- banks will have to maintain a so-called core capital ratio of at least 6%.[Note, not enough Euros out there to do this, so must be M4 created, or borrowed from the European Bank of Clearance, Basel's flaw in a nut shell.]For many banks, capitalisation under Basel II is deemed very weak. Transition rules would give them time to fix the situation, but not a reprieve from the need to raise more equity. Overall, this could be particularly negative for the European banks. The European banking sector as a whole will have an aggregate extra funding requirement of more than one trillion euros, nearly one and a half trillion dollars, to comply with Basel III according to a number of projections from major financial institutions.[That turnover is only there, as another bank is waiting for that turn over back. Banks needing to retaining turn over -- shorts the next bank in line, waiting for those funds to be relent, so they can balance their loan program. ]The American banks' requirements are a lot less. Under changes to the Basel capital directive designed to improve the capital strength of big banks that have collectively lost hundreds of billions in the past few years, small to medium size brokers may also have to put aside a larger proportion of their turnover as a risk-capital buffer.European and American banks currently utilise either Basel I or Basel II. Those regulatory frameworks represent a colossal, decades-long effort at honing and perfection, with minimum capital requirements carefully calculated from detailed mathematical models and formulae. How helpful are those rules when recent history shows that the answers provided were completely wrong. Five days before the bankruptcy of Lehman Brothers in September 2008, it boasted a Basel-type “Tier 1” capital ratio of 11%, almost three times the regulatory minimum. When the share price collapsed, counter-party confidence ebbed away much faster than the capital adequacy ratio would suggest. When there is a 21st century stock market run on a publicly traded bank, capital adequacy ratios become marginalised.[Lehman bankruptcy is not about BASEL, it was about management's greed, and the use of a large the bank to cheat on a massive scale. Speculation, and fraud are not a good mix. Goldman Sachs next example of bank racketering, and exploiting small nations regulator systems.]The Lehman Brothers bankruptcy, followed by the government led rescue of several high flyer banks, poses an obvious conundrum for the Basel-based bank supervisors: if they have already tried and failed to make capital rules foolproof via Basel I and Basel II, why should they do better this time with Basel III? Surely, they must not just worry about hurdles being too low, if the entire track has a tendency to get flooded from time to time. If the Basel Committee overreacts to the financial crisis and devises rules that are too strict, they may endanger the global recovery. Further, how can national supervisors deal with the basket-case banks, for which no reasonable buffer will be adequate? "The Committee's "Basel III" proposal covers the following key points:1. Tier 1 Capital BaseRaises the quality, consistency and transparency of the capital base. Some of the existing Tier 1 capital will be disqualified under the new rules. The new rules are intended to ensure that the banking system is in a better position to absorb losses on both a going concern and a gone concern basis. In addition to raising the quality of the Tier 1 capital base, the Committee is also harmonising the other elements of the capital structure.2. Minimum Liquidity StandardIntroduces a global minimum liquidity standard for internationally active banks that includes a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio. The framework also includes a common set of monitoring metrics to assist supervisors in identifying and analysing liquidity risk trends at both the bank and system wide level. Those standards and monitoring metrics complement the Committee's Principles for sound liquidity risk management and supervision issued in September 2008. Banks are required to hold significantly more government bonds on their books. The new liquidity coverage ratio aims to ensure adequate liquidity in the event of another market dislocation. It is meant to require a bank to maintain an adequate level of unencumbered, high quality assets that can be converted into cash to meet its liquidity needs for a 30 day time horizon under an acute liquidity stress scenario.3. Leverage RatioIntroduces a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 treatment based on appropriate review and calibration. The leverage ratio will help contain the build-up of excessive leverage in the banking system, and introduce additional safeguards against model risk and measurement error. To ensure comparability, the details of the leverage ratio will be harmonised internationally, fully adjusting for any remaining differences in accounting.4. Counterparty Credit Risk - Derivatives, Repos and SecuritiesStrengthens the risk coverage of the capital framework. In addition to the trading book and securitisation reforms announced in July 2009, the Committee is proposing to strengthen the capital requirements for counterparty credit risk exposures arising from derivatives, repos and securities financing activities. The strengthened counterparty capital requirements will also increase incentives to move Over-The-Counter (OTC) derivative exposures to central counterparties and exchanges. The Basel Committee will also promote further convergence in the measurement, management and supervision of operational risk.[Economic fallacy, that a nation must manage its books like households do. Fallacy of thinking the macro, is the micro. Question. If the Bank of Canada's currency printed in circulation in 50 billion, obviously the reserves are bigger than this, so what are the reserves in. Stock market capitalizations?]5. Countercyclical Capital BuffersIntroduces a series of measures to promote the build-up of capital buffers in good times that can be drawn upon in periods of stress. A countercyclical capital framework will contribute to a more stable banking system, which will help dampen, instead of amplify, economic and financial shocks. In addition, the Basel Committee is promoting more forward-looking provisioning based on expected losses, which captures actual losses more transparently and is also less pro-cyclical than the current "incurred loss" provisioning model."http://www.filepie.us/?title=Basel_II