Is Basel III dead?

The European Commission estimates that the region’s banks will have to raise about $600 billion to comply with the new capital rules…Both the Bloomberg Europe 500 Banks and Financial Services Index and the KBW Bank Index of U.S. bank stocks have fallen about 30 percent this year. That wiped out more than $700 billion of market value on the two continents.

Here is much more.


The whole financial system is dead.

....And basel III is just beating on a dead horse

Who among us really thought that the European banks were solvent?


When you say wiped out market value of banks, you presume that their market value was correctly valued, and that they were not dangerously overleveraged.

The other way you can look at this is that they are, and have to be, on the path to delveraging and relying less on the state to provide their investors the insurance they need to play this risky game.

If you don't believe in EMH, why would you think the price today is more accurate than the price two months ago?

Basel style rules will never work, we need real, overarching reform.

So instead of raising enough capital to reduce leverage to a sane ratio, we should have zombie banks that for years (or even a decade) essentially fraudulently manipulate NPLs to be low enough not to wipe out all equity, and to under-provision and therefore show positive earnings? All this while the governments and central banks, implicitly or explicitly, guarantee 100% of the dumb money (deposits, interbank money, commercial paper, bonds) that funds these operations. Sounds great to me. Not too far from Japan from 1990-2002. (And beyond in some cases - how can debt from the very levered railroads, for example, still be marked at book value at the Japanese banks?)

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